e-Retail growth set to slow significantly

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Following a decade of rapid growth, online shopping is set to slow down significantly as the channel matures and competition increases. Furthermore the high spending young family shopper is the one most likely to curb spending as government cutbacks begin to bite. Retailers will have to work much harder to win and keep online customers, says independent retail analyst Verdict.

At the recent e-Retail 2010 and Beyond* conference Verdict commented that although online expenditure will increase by more than 56% to 35 billion by 2014, and will continue to outperform total retail, growth will slow considerably from previous years indeed Verdict forecasts average annual growth between 2009 and 2014 will be 12% compared with an average of 35% per annum over the previous decade. Moreover the most valuable and prolific shopper group, the 35-44 year olds, currently spending 6.2 billion online, and accounting for a over a third of online retail expenditure in 2009, are the ones most likely to cut back on spending.

The number of online shoppers is also heading for saturation though Verdict predicts numbers will rise to 32.5 million in 2014 this will be only another four million shoppers, and their spend will be spread over far more websites as the number of retailers online continues to increase rapidly. Malcolm Pinkerton, senior retail analyst said: "With the number of people shopping online becoming highly saturated, retailers will have to change and evolve their online strategies. Driving loyalty and increasing spend per head across all age groups will become vital factors to ensure growth."

Driving higher spend from all demographic groups
The highest current spenders on line are the 34-44 year olds (992 per head per year) followed by the 25-34 year olds (806 per head).  By tailoring both service and product range towards other, currently under spending age groups, retailers can maximise their online potential. Furthermore physical retailers are at an advantage; Verdict's research reveals 14 out of the Top 20 most used shopping sites belong to physical retailers and as a retailer's multi channel shopper is the most valuable (because they spend well above the average), encouraging existing customers online and acquiring new online customers offers a clear opportunity.
 
It is the shoppers in the 15-24 and 55+ age groups which show the most growth potential.  A third of shoppers aged 15-24 said the inclusion of pictures and videos on a website are important and these are also prolific users of mobiles.  Retailers would be wise to build this into their strategy as it will be those that do who stand the best chance of converting this age group into regular customers. Meanwhile for the 55+s the convenience of shopping online linked to trusted retail brands is a key attraction, especially as they become more internet savvy. Ensuring a customer experience that meets their service expectations will be key to their loyalty.
 
Sarah Peters, senior retail analyst added "The online shopper is extremely valuable. Retailers have had it relatively easy online over the past decade because of the channel's rapid growth and lack of competition, but just as in overall retail, the next five years will be much more challenging.  If they plan their strategy now and understand the change in the competitive dynamics they will be able to ensure they profit as a result."
 
Commenting on the e-Retail 2010 and Beyond findings, Jeff Dakin, managing director, Htec, the customer loyalty specialists said: "With the outlook for a more measured rate of growth in e-Retail the ingenuity of UK retailers will be clearly tested over the coming years.  Retaining market share through economically difficult times will invariably make customer experience and satisfaction and loyalty key battlegrounds that will govern online expenditure.  Technology is already playing its part in advancing and improving experiences like mobile shopping while online loyalty programmes have the potential to incentivise higher spend across all demographic groups.  Retailers are going to have to find the right balance of strategies to not only win customers but also keep them coming back for more."

* Verdict Research ran an event for its clients in London this morning sponsored by Htec - e-Retail 2010 and Beyond based on its annual consumer survey of the e-Retail shopper.