Sales increase as online shopping confidence grows

Hazel Ward

UK e-tailers are set to report higher-than-expected online sales over the Christmas period, beating analysts' expectations and...

Hazel Ward

UK e-tailers are set to report higher-than-expected online sales over the Christmas period, beating analysts' expectations and bucking a downward trend after a year in which confidence in online shopping took a nosedive.

Among those reporting a healthy increase in sales was America Online, which last week said its members spent $4.6bn (£3.1bn) online over Christmas, an increase of 84% from a year earlier, while said it sold 35 million items in the period leading up to Christmas, compared with 20 million in 1999.

In the UK, said it sold three million items in the period between 2 November and 19 December, doubling the number of products sold in the same period a year earlier while, the online arm of Britain's biggest supermarket, said it had delivered more than 30 million items during December.

While the company did not publish details of the total online spend for the period, it said turnover was four times higher than in 1999. Tesco is due to issue a trading statement covering the Christmas period on 16 January.

Although there was little in the way of concrete figures for the total spend online, research published last week by Microsoft and Tornado-Insider, a UK information portal, showed that most UK e-tailers, particularly the more established, experienced significant sales growth over the holiday period.

The survey, which examined the experiences of 200 online trading sites between mid-November and mid-December, showed that up to 66% of UK e-tailers reported an increase in sales, most of which averaged a sales increase of about 57%, compared with the same period last year. Of those over a year old, 19% said sales had increased by more than 200%.

Jeremy Gittins, group marketing manager at Microsoft, said the results showed a significant increase in consumer confidence. "I believe consumer confidence is the main reason for the sales increase, followed by improved infrastructure and fulfilment. You would expect consumer confidence to be declining but, despite the high-profile losses we saw last year, the practice of buying on the Internet is increasing.

"The results show that UK e-tailers were smarter this Christmas and learned a lot about business practice. They have also worked on the fulfilment issues which caused so many problems last year. E-retail is going to increase and as the Internet business world matures, we are going to see a strong market built on that maturity," he added.

It was not just the bigger retail names that benefited from the Christmas period. Ron Benson, managing director of, a London-based video and DVD retailer, said, "We were very busy in November and early December, with online sales over 100% higher than last year, while our mail order business was moderately higher. Consumer confidence is definitely higher and it is going to increase because when people make a successful online transaction it gives them more confidence."

But industry figures were divided over whether the higher sales figures pointed to an increase in consumer confidence. Phil Hendey, chief marketing officer at Web site certification company ClickSure, said increased sales were the result of a change in consumer behaviour.

"What has happened is that people have learned from last year and bought products well in advance. After Christmas 1999, consumers had no confidence in fast turnarounds so they have had to modify their behaviour. In 1999, promises were made that were never going to be kept but this year, consumers have been far more savvy and managed their own expectations better," he said.

But Hendey was upbeat about the prospects for online retail. "UK e-tailers should be quite optimistic - as a channel, e-tailing is definitely becoming established but once it crosses the first hurdle of being accepted, the emphasis will be on privacy, security, credit card transactions and the availability of private information," he said.

A good Christmas, however, was not sufficient to guarantee the future for US-based eToys, the struggling online toy retailer, which last week pulled the plug on its UK operations, despite strong holiday sales. The closure, which is to take place on 19 January, is the latest blow to the UK e-tail sector, which has faced a stream of company failures since the collapse of last May when investors refused to continue funding its heavy losses.

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