After much hype and several false starts, Internet-based retailing is finally set to become a reality.
Sales forcases in the UK are set to hit close to 15-billion pounds this year, from 3-billion pounds in 2001 to 11-billion pounds in 2006 – and forecast to hit 36-billion pounds in 2011.
In the period 2006-2011, 60% of the growth in total retail sales it set to come from the online segment of the retail market.
And it is not only the computer-literate youth who have adopted this lifestyle. PricewaterhouseCoopers primary research conducted among 1 500 UK consumers shows that in 2002, 41% of UK online shoppers were in the age group 18-34 years. This has now dropped down to 29% while the over-55 age group has increased from 14% to 22% in this same period. In terms of gender, the female now has the majority position (54%) when it comes to shopping over the net.
Nicholas Hewitt, global leader of the PwC Strategy Group and a partner in the UK Transaction Services business, says that when online retail shopping first appeared, the traditional purchases were books. This seasoned generation of shoppers has now moved up the ladder and will purchase high value items such as computers, holidays, clothing, air travel, flowers and toys over the Internet.
Shoppers who came into this type of medium slighter later in the game made their entrance with the purchase of CDs. Those who are starting right now to shop online for the first time are kicking off with clothing purchases.
The PwC survey shows that CDs and DVDs (76% of the online shopping population) and books (71%) remain at the top of the list of most popular shopping items, followed by clothing and footwear ( 57%), moving through food, groceries, white goods, health and beauty, furniture, home wares, electrical items, down to DIY, with 6% of respondents having bought their cars online.
The expansion in online shopping has major implications for the retail business model in terms of product range, price, distribution and customer interaction. Both suppliers of the products and the retail operators need to constantly reassess how they do business in such dynamic times. For example, UK high street shops offer 68 options when it comes to washing machines but online specialists offer three times this at 171 options. Online prices can also vary greatly with some products found at less than half the price.
Online retailers need to design the most appropriate customer interaction model that best fits the customer profile in terms of how they perform their shopping research, compare products, arrive at the purchase decision and how they want to take delivery of the item. Online shopping competes with destination venues like the malls and needs to become an exciting retail theatre experience with exciting yet easy consumer interaction.
Hewitt says that online shopping is now mainstream and provides a serious challenge to the traditional retail model. “There are now major opportunities for branded consumer products companies to seize upon.”
But, although online retail is experiencing massive growth in certain regions, Anton Wentzel, South African National Leader for Retail and Consumer, at PwC says that the local market compares poorly. This is largely because the country has extremely low broadband penetration with only 2% of households accessing the Internet this way compared to over 50% in Europe and North America. South Africa is ranked as having the 20th lowest penetration of all countries with broadband availability.