Home shopping to account for 30% of retail sales

The home shopping market could account for a third of all retail sales in the UK, with the Internet accounting for around 30% alone according to a new report. The UK home shopping market was valued at an estimated £58.34bn in 2007, or more than double the £28.02bn spent in 2003. However, the figures mask the widely diverging fortunes of individual sectors: while the e-commerce sector has exploded (largely a result of the Internet shopping subsector), the general mail-order sector has experienced a sharp decline and the other two market sectors (direct marketing and direct selling) are growing, but at a sluggish pace.

The Internet now claims around 18% of total consumer spending, even if, 5 years ago, the figure would have been negligible. Another factor driving the market is rising broadband penetration. However, there are still teething problems with e-commerce; with some goods failing to reach the intended recipient in time for Christmas 2007, for example.

The dotcom boom and bust of the early part of this decade propelled the Internet into the public’s consciousness, although doubts still remained about its commercial viability; doubts that no longer exist. Mainstream retailers have wholeheartedly embraced the medium and it is a central part of most companies’ marketing and sales strategy. The marketplace is fiercely competitive, with companies investing huge sums to ensure that their websites are easy to use, so as not to lose out to the vast number of online competitors.

The largest retailers will increasingly come to dominate the e-commerce sector. This is a result of concerns over security and the need to continually invest large sums of money in websites, logistical services, such as customer support, etc. The days when a website, such as Amazon or eBay could emerge and develop into a huge multinational concern may be over. Meanwhile, the general mail-order sector is increasingly overlapping with the e-commerce sector, and the direct selling and direct marketing sectors are also coming under increasing competitive pressure from the growth of e-commerce.

Key Note believes that the home shopping market will continue to expand at a rapid, albeit decelerating pace over the next 5 years and that, by 2012, home shopping will account for around a third of all retail sales in the UK, with the Internet accounting for around 30% alone. Technological factors (such as the growth of broadband) will boost demand for e-commerce, while the major grocery retailers are expected to expand their home shopping services across much of the country.

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Key Note predicts that the expansion of e-commerce (and, in particular, the Internet) will be the key factor driving overall growth in the home shopping market for the foreseeable future. The general mail-order sector may completely converge with the Internet by 2012, while direct sales are likely to begin to decline. However, many people continue to regard shopping as a leisure activity and also want to buy some goods, such as clothes, personally so that they can try them on. This will inevitably limit growth at some point.

Image:Shopping Trolley

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