Grab your share of the £1bn online Christmas bonanza

Online purchases are set to top £1bn in the UK this Christmas, but many firms could fail to make the most of it. Daniel Thomas...

Online purchases are set to top £1bn in the UK this Christmas, but many firms could fail to make the most of it. Daniel Thomas reports

This year is expected to be the biggest online Christmas to date by some margin, with UK consumers set to spend more than £1bn on Web purchases during December, according to estimates from Royal Mail and trade body the Interactive Media in Retail Group.

There is no doubt that the demand is there from UK consumers, but online retailers could achieve even higher revenues by ensuring they provide a good user experience, new research has suggested.

A survey by technology consultancy Hewson Group, released last week, estimated that a typical business can increase online sales by as much as 64% by improving the user experience offered to its Web customers.

The survey is based on a range of sources, including comments received from 500,000 consumer opinion surveys completed on UK retail and travel sites over the past two years; results from the eDigital Research panel, which analysed responses from 10,000 mystery shoppers using UK Web sites during the same period; and findings from the global eDigital panel of Internet users, surveyed during July 2002.

By improving the online experience to match the best competitor, the average online grocer, for example, could increase sales by a minimum of 54% and increase online sales over its worst competitor by 480%, the research said.

Online travel firms, meanwhile, could boost sales by 33% on average and by 100% for those currently providing the worst online user experience, it said.

Even in the highly competitive sector of books and CDs, the businesses currently providing the worst online experience for customers could improve sales by 19%, Hewson Group said.

As well as adversely affecting sales, a poor online service can damage the overall brand, the research warned. Some 44% of UK online shoppers said a bad online experience would discourage them from buying from that company's high street store or catalogue.

There was some good news for online retailers in the Hewson research, however. It revealed that online customers are more loyal than their offline equivalents. The top 75% of UK online shoppers are worth an average of £936 each in annual sales to their favourite site, the research found.

Meanwhile, a separate survey, exclusive to Computer Weekly, has revealed that UK online retailers need to improve the availability and download times on their Web sites.

Network management firm Parallel monitored the Web site performance of 51 UK-based online retailers for the three months to 1 November. It found that the average amount of time a site was unavailable was 11 hours and 58 minutes. This equates to nearly 48 hours per year.

Tim Moore, director at Parallel, said online retailers need to address the problem because consumers are becoming more demanding.

"As more people get broadband connections the expectations will rise," he said. "It will not be a case of how well the [consumer's] ISP is performing but a case of how the Web site itself is performing. In a highly competitive sector this is very important."

The research also found that 72% of the sites had a page size over the generally recommended 40Kbytes, meaning that only 16% downloaded in less than eight seconds for home users connecting with a modem - the maximum time most users will tolerate.

Keeping your site down to a manageable size so that downloading time is kept to a minimum is perhaps more important than achieving high levels of availability, according to Moore.

"There is no point having high availability if your have poor performance," he said. "Zoom [clothing retailer Arcadia's online store] is a case in point here - it has 99.97% availability but one of the slowest download times overall."

Encouragingly, however, online retailers are beginning to take steps to make their Web sites more manageable, Moore said.

"Retailers are beginning to learn the lesson that reducing file size is important," he said. "Companies have started to address the issue by, for example, compressing Web pages - they only become decompressed in the browser."

Whatever technologies are used, it is clear that demands on IT managers in this sector will grow with sales.

The UK's expanding online market
UK consumers will spend more than £1bn online this Christmas, according to the Royal Mail and trade body the Interactive Media in Retail Group (IMRG). Internet spend in the four weeks up to Christmas will be double that of the same period last year, their research predicted.

Royal Mail and IMRG also expect a 40% increase in the number of online shoppers this festive period, from seven million to ten million.

The research, based on a Royal Mail survey of more than 25,000 consumers and research from IMRG, revealed that home shoppers are expected to increase the frequency of online purchases from an average of 3.7 times per month in December 2001 to 4.2 times a month in December 2002.

Rising consumer confidence is also reflected in the range of products purchased by home shoppers, with bigger items, such as electrical goods and clothes, showing significant growth.

Clothes are now the third most popular home shopping purchase (behind books and CDs) with 20% of online shoppers spending more than £100 a month on clothing. Expenditure on electrical goods, such as hi-fis and DVD players, rose by 2% to 9%, taking the total value of purchases to £150m a month.

The UK's Web-based retailers look forward to a bumper Christmas

David McQueen Johnston, head of e-commerce, confectionery retailer Thorntons

"The seasonal approach is always a taxing time for online retailers, although Christmas orders are in line with our expectations and our customers are demonstrating more confidence in the direct delivery channels. This is manifesting itself in a trend of early orders for delivery close to Christmas, leaving us with a strong conviction that our early start indicates that we will deliver a record Christmas."

Tim Lodge, managing director, online footwear retailer

"I can confidently say that we are witnessing a huge upsurge in consumers' confidence to shop online. Whereas our high street shops are showing a modest 5% annual increase on like-for-like sales, our online sales are showing an increase of 60% over the same period."

Rowan Gormley, chief executive, online drinks retailer Virgin Wines

"Virgin Wines has experienced a huge surge in sales in the past few months, driven largely by a sustained increase in repeat purchases from existing customers, which bodes well for our key Christmas trading period."

Jeremy Palmer, e-commerce director, online drinks retailer Majestic Online

"For the second year running Majestic Online is seeing a marked increase in its share of total company business in the run up to Christmas. This ability to soak up extra demand without putting extra pressure on our retail operation is a real benefit to the company as a whole."

Howard Bryant, finance director, online lingerie retailer figleaves

"Figleaves again achieved a fantastic 100% year-on-year growth [for October], and increased margins on like-for-like sales. We are confident that this performance will continue well into the pre-Xmas period."

Julian Granville managing director, online fashion retailer BODEN

"Boden customers are increasingly inclined to order over the Internet. More than 25% of all our business is now taken on the Internet."

Read more on Data centre hardware