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Comment: Online retail from sideshow to recession-buster
Cameron McLean

Once seen as a sideshow, it’s now an essential part of Britain’s retail sector, as the announcement of the first PayPal ‘UK Online Retail Report’ last week showed. By Cameron McLean

OMNICHANNEL

Comment: Online retail from sideshow to recession-buster

The report, undertaken for PayPal by Experian, forecasts that online shopping will ride to the rescue of British retailing over the next few years, with the continuing growth of online sales helping compensate for falling high street sales, as the only area of British retailing likely to record growing sales. And in 2011, we expect overall retail volumes to start to grow again, th
anks again to booming internet sales.

It's significant that online can have such a dramatic impact on retailing, given that internet sales still represent a relatively small proportion of retail sales. There's little doubt that the credit crunch and recession have given e-commerce a big boost, as consumers head online to get a bargain. (The report talks about a shift to 'considered consumption'.)

But we're also seeing a permanent shift in consumer behaviour, with a quarter of the UK adults we surveyed for the report thinking that online shopping will become the norm. Although PayPal believes that the high street will be there for many years, we do expect online retailing to more than double its share of retail sales to 7.4 per cent by the end of 2011, with one in every 14 pounds spent online.

The new 'considered consumers' see online shopping as a great way to keep within a tight budget - a quarter of British adults shop online at least once a week, and one on eight say they're always on the lookout for special offers and promotions.

Two thirds of consumers have used discount and promotional vouchers online and in-store over the last six months - suggesting that we're applying our internet bargaining behaviour to the high street.

Significantly, it seems that price cuts are not tempting us towards impulse buys: many people are simply using them to get a better deal on things they were planning to buy anyway.

One clear lesson from the report is that retailers still have some way to go to make it easy for consumers to buy online. Over half those questioned for the report said that most high street retailers could significantly improve their online presence and transaction process.

PayPal's growth reflects these changes taking place and our total payment volume in 2008 represented nearly nine percent of global e-commerce. We're in an almost unique position as a global payment service that was built specifically for the online world.

A decade ago, the world saw the frenzy of the dotcom bubble. Fortunes were made and lost as online businesses were established in a climate of exuberance, only for many to disappear as quickly as they were born. It's hard to imagine a greater contrast with today's world of e-commerce, with online firmly established in the mainstream, and the successful pioneers now multi-billion pound businesses with hugely successful brands. The frontier days are long gone, but there are many companies out there that continue to evolve and innovate to take advantage of the huge opportunities offered by the online revolution.

Cameron McLean, head of UK merchant services at PayPal

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