UK E-Retail 2011

Introduction

Verdict Research: Online retail has substantially outperformed the wider market during the downturn, due to its value credentials and immaturity as a channel. However, retailers will now see growth tailing off unless they can offer shoppers greater enjoyment and convenience, particularly in regards to delivery options.

Features and benefits

• Contains comprehensive consumer research data on the online shopping habits of 3,000 shoppers.
• Offers extensive analysis of demographic profiles and shopper behaviour.
• Addresses a range of relevant key issues, such as the impact of social media, the role of SEO and how retailers should adapt to multichannel shoppers
• Data includes market value and growth 2005-2010, with annual forecasts to 2015 for the online market and nine key sub sectors separately.

Highlights

The online channel grew by 15.8% to £23.1bn in 2010, a significant outperformance of the wider retail market. The major driver of this has been cautious shoppers viewing the internet as offering better value. In 2010 more online shoppers stated the internet was superior to stores for both cheaper goods (73.5%) and comparing prices (81.5%).
With fewer easy wins available from new shoppers, online retailers must now begin to focus on how they can get consumers spending more per head. For many retailers complacency has created barriers to shoppers spending more, such as poorly developed delivery and returns options, pedestrian sites and poor customer service.
As a greater number of older consumers gain online access, more are shopping and spending on the internet. However, there is also a warning for retailers that growth in this area will not necessarily come easily. In both the health & beauty and food & grocery sectors penetration of older shoppers fell in 2010.

Your key questions answered

• What is the size and future growth potential of the online market by sector and what prospects does it offer to my business?
• What are the attitudes and behaviours of online shoppers in different sectors and how can I attract and convert them?
• What are the future challenges facing online retailers and how can I prepare for them?

Table of contents

Executive Summary
Main conclusions
Value characteristics of online generate strong sales growth
Smaller discretionary sectors perform better than larger home-related ones
Fewer potential gains available from new shoppers
Retailers must focus on helping existing consumers spend more
Delivery is one area that must be improved …
... enjoyment is another
Social media will play an increasing role in helping retailers improve their offers
Search Engine Optimisation will continue to rise up the retailer agenda
Shoppers increasingly multichannel
Older shoppers begin to pay dividends but retailers cannot become complacent
Men increase their proportion of spending
AB shoppers continue to dominate

VERDICT VIEW
Methodology

MARKET SUMMARY & OUTLOOK
Online spending growth and forecasts
Penetration continues to increase but growth slows
Shoppers as % of internet users hit plateau
Begin to level out
Spend per head growth to hit downslope but lots of potential remains
Annual spend per head online increases as shoppers look for deals
Frequency of online shopping seems to have a ceiling of 17 times a year
Number of trips per year recovers in 2010

KEY ISSUES
Retailers risk alienating consumers with sub standard delivery services
Retailers need to provide more choice to satisfy consumers
Returns options remain inadequate
The prospect of having to return something dissuades many consumers from making purchases online
Returning items remains a complex and inconvenient process
Multichannel retailers must take advantage of their stores
Collect+ offers retailers with limited store portfolios an opportunity to improve their returns service
Pureplays need to reassure customers to grow share in higher value items
Social media improves the online shopping experience
Online shopping becomes an increasingly social affair
Importance of leveraging personal relationships to promote a brand
Social media strategies should aim to influence the influential voices
Group buying offers another exciting, social way to drive publicity
Social media is also a great tool for two way conversations
Social media offers a way of improving experience of premium goods shopping
SEO requires ever greater investment to stand out
Managing SEO is increasingly complex
Improving SEO results requires more and more effort
Niche search terms increasingly targeted
Greater use of paid terms
More international focus
Retailers will need to adapt as search becomes more social
SEO duties will increasingly be performed inhouse
Retailers must adapt to multichannel shoppers
Retailers must understand how consumers use different channels and tailor them accordingly
Driving store visitors online
Attracting online visitors to stores
Tailoring channels to complement each other

CONSUMER ANALYSIS
Summary
Shopper numbers grow but at slower rate than online users
Change in profile following quicker growth among both female and older shoppers
Online shopping habits by gender
Internet access by gender
Total online spending by gender
Spend per head by gender
Shopping trips by gender
Online shopping habits by age
Internet access by age
Total online spending by age group
Spend per head by age group
Average transaction size by age
Online shopping habits by socioeconomic group
Internet access by socioeconomic group
Main growth in internet shoppers comes from C1 and C2 users
Total online spending by socioeconomic group
Spend per head by socioeconomic group
Average transaction size by socioeconomic group
Online vs instore shopping
Proportion of shoppers that prefer online rises for second consecutive year
Fall in convenience
Reasons to shop online and satisfaction levels
Returning goods continues to be a weak point for e-retail
Top 10 reasons why shoppers chose to shop with a retailer online
Online reviews
Security issues
Retailer reputation
Value issues
Technical issues
Personalised and interactive features of websites
Product information
Delivery and returns are becoming significant battlegrounds
Website ease of use and navigation is now more pivotal
Use of social media creates new expectations among younger shoppers
Multichannel habits – research before purchasing has become more important
Click and collect penetration is up
Search engines have overtaken word of mouth as the main way shoppers discover websites

SECTOR OVERVIEW
Electricals retain highest online sales
Health & beauty advances fastest once more
Music & video is sector with biggest proportion of sales via internet
Clothing & footwear claims highest number of shoppers
DIY slips to third from top for ratio of male shoppers
Clothing & footwear climbs to second from fourth for ratio of women shoppers
Electricals claim biggest spend per head by both genders
Clothing & footwear is most frequent purchase online
Consumers choose the internet for convenience and lower prices
Free delivery top selling point
Retailer reputation high among reasons for buying from one website over another
Good service high among reasons for returning to a website
Internet used more for research on books, clothing, electricals and music

BOOKS
Online's share of the market to grow aggressively
New technology will boost share of internet shoppers
Spend per head growth will tail off
Discounting lowers amount consumers spend
Frequency moves up the scale
e-Readers drive up male penetration
Penetration remains down on pre-downturn levels
Lower prices continue to become more important
Online gains ground over instore
Major players
Outlook

CLOTHING & FOOTWEAR
Online clothing & footwear market set to more than double in size by 2015
Growth continues ahead of overall online market
Spend per head set to increase fuelled by inflationary pressures
Increased spend reflects maturing market
Increase in online visits as shoppers feel more confident with channel
Surge in shopper numbers and spend
Females continue to drive growth but over 55s have tested online and found it wanting
Convenience & range dip significantly while price comes into focus
Unusual products and comparing prices represent unique offer online
Major players
Outlook

DIY & GARDENING
Online spending surprisingly strong
Online traffic recovers upward trend
Weak spend per head reflects low shopper confidence and the high number of novice shoppers
Sales of £20.00 and under continue to make up a large proportion of online sales
Shopper frequency increases
Faster growth in women shoppers
More mature shoppers show increasing bond with online DIY & gardening
Collapsing convenience score indicates need to deliver on delivery
Retailers should take notes from outside DIY & gardening sector to improve service and quality
Major players
Outlook

ELECTRICALS
Online growth slows but sector is becoming increasingly multichannel
Sector has reached maturity
Spend per head will see return to growth
Big ticket sales become more common
Men and women display vastly different shopping habits
Opportunity for growing spend from females
Ongoing growth in older shoppers
Lower prices overtake convenience as number reason to shop online
Service elements of offer require improvement
Major players
Outlook

FOOD & GROCERY
Channel continues to grow as retailers expand offer
Food & grocery continues to grow share of internet shoppers
Ongoing steady growth in spend per head
Shoppers spend more
Higher proportion of shoppers are purchasing 50+ times a year
Shopper numbers up as spend drops
Young affluent males provide fillip to growth
Convenience remains major advantage of online
Preference for online grows
Major players
Outlook

FURNITURE & FLOORCOVERINGS
Lack of tangibility online hampers furniture and floorcoverings penetration
Shopper numbers remain depressed
AB shoppers push up spend per head
Majority of shoppers fit into one of two bands
Consumers use online for research more frequently than for some other sectors
Women majority of shoppers and men spend more
Penetration down across most demographics
Price gains ground on convenience as main advantage of online
Online must do more to build trust
Major players
Outlook

HEALTH & BEAUTY
Penetration grows despite some shoppers disengaging
Shopper numbers fall, but only temporarily
Spend per head grows significantly
In 2010 Market depended on loyal shoppers spending more for growth
Frequency of shopping increases, among men in particular
Women account for majority of spend despite much lower spend per head
Demographic penetration: drop in 55+ and AB shoppers
Lower prices found online becomes increasing growth driver
Internet needs to become more enjoyable
Major players
Outlook

HOMEWARES
Growth set to pick up pace as housing market recovers
Recovering shopper numbers with renewed interest in sector
Steep decline of 2010 set to recover
Strong propensity to spend under £20
Customers shopping often indicates potential of sector
Males shop less but spend more per head
Shoppers increase across all demographics as market recovers
Convenience loses pace but price continues to attract shoppers
Drop in speed of purchase will impede price credentials
Online winning for price measures
Major players
John Lewis
Outlook

MUSIC & VIDEO
Building volumes and brand equity key to long term gains

Share of Internet shoppers beginning to mature
Greater ease of purchase has encouraged consumers to spend more
Most shoppers spend relatively small amounts compared with other sectors
Frequency of shop increases
Men continue to dominate sector
Retailers must consider dual approach to marketing
Convenience falls despite technological advances
Retailers face a challenge to establish loyalty
Major players
Outlook

APPENDIX
Glossary
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Global Retail FreeView
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Related research categories

By sector: Retail (in Off-trade)

By market: United Kingdom (in Europe)