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Forecasts for online spending fall

Online sales growth forecast revised to 12% for H2 2009, from original view of 15%


Forecasts for online spending fall

Online sales growth forecast revised to 12% for H2 2009, from original view of 15%

New figures from the IMRG Capgemini e-Retail Sales Index show that UK shoppers spent £22.9 billion online in the first six months of 2009.Online spending has proven to be more resilient than spending on the high street, with year on year sales for the month of June rising by 12.3%. However, the Index reveals that there is a slowing rate of growth as sales in
June fell by 1.3% compared to May. As a result, IMRG Capgemini's forecasts for online retail growth have been revised down from 15% to 12% for the second half of 2009.

Although the predicted slower rate of growth in the second half of 2009 is in line with the longer term historical trend, this should not mask the fact that online continues to be the driver of growth in the retail sector.For only one month in the first half of 2009 has there been positive year on year growth in high street sales - compared to an average of 14% year on year growth in the IMRG Capgemini E-Retail Sales Index.

In addition, the Electricals and the Clothing & Footwear sectors have performed consistently ahead of the Index during the last six months.

The Index displays evidence of consumers “windows shopping” with the average Conversion Rate, which measures the number of purchases per visit, declining for e-retailers from 7-8% in 2007, to 5-6% in 2008 and now to 4-5% in H1 2009.

Mike Petevinos, Head of Consulting for Retail for Capgemini UK, said:“The online sales results for the first half of 2009 show a slight slowing of growth, as the recession weakens consumer spending on the web. However, growth still looks set to continue for the rest of 2009 with our predictions being at around 12%.

With online continuing to see growth in sales, the key concern for retailers should be how well set up are they to exploit this. Our latest results show that online Conversion Rates have been in steady decline from 7-8% in 2007 to 4-5% in H1 2009. Greater levels of competition and an increased propensity of consumers to research before they buy will put pressure on conversion. However, this level of decline highlights a clear opportunity for retailers to improve customer experience through their online stores in order to capture their purchases.”

Tina Spooner, Director of Information at IMRG comments:“Price continues to be a major factor for consumers when shopping online, with recent research suggesting that 90% of UK households are adopting more prudent buying strategies to cope during the recession. It is clear there will be challenges ahead in the coming months for e-retailers as they prepare for the lucrative festive season.Despite the fact the Index "bounced" back in June and online sales continue to prove resilient to market forces, retailers must ensure that they optimise each sale and continue to invest in web site improvements to take maximum advantage from the upturn when it arrives.”

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