How click-happy Britain fell in love with online shopping
Weather, broadband and credit cards have created a phenomenon
Richard Wray and Joel Raku
Saturday September 2, 2006
Britain is, by a very long distance, the biggets internet shopping nation in Europe.
Average amount spent on internet shopping, 2005
Britain - £875
Denmark - £734
Germany - £405
France - £254
It seems like Continental European countries are still more interested in old-fashioned things, like being big agricultural nations (that's why they have the CAP) rather than embracing modern technology)
Rather than battle their way through the hordes on the high street at the weekend, British shoppers are embracing the internet, spending more than their European counterparts booking holidays, hunting out book and DVD bargains and having groceries delivered to their door.
Overall retail sales growth in Britain shows that consumers have been moving from scrimping and saving in order to pay off some of their debts, as a rise in interest rates looms, to splurging out on all sorts of goods and services. In August, retail sales grew at their fastest for 20 months according to the CBI. But online sales are increasing at an even faster rate.
The Interactive Media in Retail Group reckons online spending is growing 10 times faster than spending in shops. And it's not just "pure" internet players such as Amazon, Play.com and Cheapflights.co.uk that are seeing the benefit, the major bricks-and-mortar players have become aware of the shift in spending habits.
This week, Tesco launched an all-out attack on rivals such as Amazon and Argos with the launch of Tesco Direct, a home shopping service that offers more than 8,000 items from furniture and electrical products to bicycles and golf clubs.
Part of the rapid growth in sales over the web in Britain is due to purely statistical reasons: online sales are a relatively small percentage of total sales. The British Retail Consortium estimates that less than 4% of all UK retail sales, which last year reached £249bn, are done online.
But British shoppers do seem to be making more use of the internet than consumers on the continent. Last year UK buyers spent an average of £875 on the web. That compares with £734 for second-placed Denmark, £405 for sixth-placed Germany and £254 by the average French shopper, according to the European Interactive Advertising Agency.
It is not just the quantity of things that British shoppers buy using their computer that make them Europe's most prolific consumers, it is the fact that they buy big-ticket items as well as their weekly groceries. While Britons spent an average of £875 last year, they spent that on an average of 12 items. Germans, in contrast, spent their £405 on 10 smaller cost items.
So why have Britons adopted the online shopping habit faster than people across the Channel? Theories range from meteorological factors: the British weather means shoppers prefer to stay indoors whenever they can, which may also explain why Denmark and Norway are heavy web shoppers, to cultural differences in that French and Italian consumers prefer to use the fresh fruit and vegetable markets on their doorsteps and do not need to go far to find a bakery. Another suggestion is that British consumers work longer hours than their lazy European counterparts and often use the web to save time.
But there are some basic differences in infrastructure that make Britain ripe for an explosion in online shopping, the most obvious of which is the take-up of high-speed internet connections. Broadband penetration in the UK is higher than in other parts of Europe and download speeds are faster, with many people on 8MB per second connections. That has allowed retailers to create ever more complex websites, showing items from different angles or in varying colours.
Alison Fennah, executive director of the European Interactive Advertising Agency, says: "Broadband has got a lot to do with it. Where there is high penetration of broadband, take up of services such as online shopping tends to happen more quickly."
Britain also has a certain first mover advantage, as many online retailers from the US, such as Amazon, used the UK as a springboard into Europe. As a result, broadband penetration increases and e-retailers become more advanced in the rest of Europe. Other countries are expected to catch up with Britain.
There is also the fact that British consumers are willing to brandish their plastic, having run up a grand total of £54.7bn on their flexible friends, and using a credit card is often central to an online transaction. Germans, in contrast, are much more wary of personal debt.
"We are certainly very willing in the UK to use our credit cards," says Ms Fennah. "We've got a higher level of credit card debt than the rest of Europe."
Some within the retail industry have suggested that the flight from the high street to the internet could speed up the collapse of English town centres, a process already well under way thanks to the proliferation of huge, out-of-town shopping centres.
Brian McBride, managing director of Amazon.co.uk, believes the internet and the high street can live together, but only if traditional retailers change the way they operate. "I think the high street will always exist, but the online world is redefining what the high street is about. If you are simply a music or book store trying to compete only on price you are going to struggle; you have to offer some differentiated service," he says.
"It's not an either-or situation; you will see people move between the two. For instance, people often start by doing their research online and then buying on the high street, or see a deal on the high street and then check for better prices online."