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Can Online Shopping get us out of a Recession?

Can Online Shopping get us out of a Recession?

Posted: 21st Dec 2009

Trends in the way in which we shop for our Christmas purchases are changing with the advent of new technologies. For many, the desire and/or time available to pound the pavements in search of bargains or that special present just isn't there. And with the growth of the internet, many retailers have found a new way to supply the demands of the savvy shopper.

The growth of online retailers such as Amazon is spectacular. The early adopters in the shopping market pressed on despite security fears over financial transactions the company has now grown into one of the leading retail organisations in the UK.

What the internet does is allow people to search and price hunt in a way not possible in years gone by. Add that to the convenience factor of 24 hours 'shopping' and guaranteed delivery and it is not surprising that the internet shopping area is tipped for success this Christmas versus traditional high street stores.

Most research being carried out seems to suggest that the total spend this Christmas will be about 0.7% down on fourth quarter 2008 levels. Stripping out food and beverages (which are expected to increase by 2.5%) and it is clear that every retailer will be working hard for each pound spent. Sales and discounting are widespread so the actual volume of goods sold may not be too different, but the all important revenue and margin will be down leading many traditional retailers struggling. It is not uncommon for some businesses to take as much as 70% of the annual turnover in the run up to Christmas so times are looking bleak.

With online shopping comes access to global suppliers. Whilst there are issues around VAT and import duties, many goods can be sourced from overseas. As consumers gain more confidence in the security of payments and the delivery mechanisms associated with internet shopping, this sector will continue to grow - probably at the expense of the bricks and mortar high street stores.

Online shopping tends to be item specific. That means that 'browsing' or impulse buys are harder to convert since when users log on, they tend to be looking for specific items at the lowest/best price with delivery assured.

As trends develop, the Centre for Retail Research has predicted that 2015 will see the first Christmas where more than 50% of seasonal purchases will be made online. That is a huge sum as even this year internet purchases are expected to reach £6.8bn - or an increase of nearly 14% on 2008. This equates to every one of us spending £132 online.

So it is unlikely that online shopping alone will get us out of a recession but it will play an important and valuable part in making Christmas more affordable and enjoyable for both shoppers and recipients of presents alike. The recession is looking as though it will have a long tail and with significant tax rises, increased unemployment and cuts in public expenditure having to be made over the coming years, disposable income will be squeezed making a consumer spending boom unlikely in the short term.

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