UK E-Retail 2011

Verdict Research Limited, May 2011, Pages: 251

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?

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
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