Brits racked up £11bn in online sales in 2006

A new report from retail analysts Verdict Research reveals the fastest rate of growth in the online sector since the busting of the dotcom bubble in 2001. 

Online retail spending in the UK in 2006 grew by 33.4 per cent to a record £10.9bn, excluding spending on services such as flights, tickets and insurance and business expenditure. This is almost 13 times faster than the retail sector overall.

The figures mean that over £1 of every extra £3 spent on retail in 2006 in the UK was claimed by an online retailer.

Verdict's e-Retail 2007 report sees no reasons for an end to the boom and expects online sales to almost triple to £28bn in 2011, equivalent to 8.9 per cent of all retail spending.

The research firm highlighted the widespread use of low cost broadband services as a driving factor behind the boom in online shopping.

Of the 3,000 consumers surveyed for the report, two-thirds have broadband access and shop online more frequently because as a result.

Another driving force is huge retailer investment. Over the past 12 months a large number of high street retailers have launched new transactional websites or scaled up their existing offerings.

However, the report shows that not everyone is keen to jump onto the online bandwagon. The research firm highlighted three types of retailer which seem set to stay out of the race to build online sales.

These are food retailers, where the infrastructure cost associated with an online launch and the strength of competition act as deterrents; value retailers (such as Matalan, Primark and Peacocks) whose business model depends on driving high sales densities from their stores; and smaller specialists whose limited scale makes it challenging to finance major online infrastructure.

"For these retailers the case for major investment in transactional websites is far from proven," said Nick Gladding, author of the report.

By 2011 the typical spend of an online shopper will grow to £1,056 a year, up from £606 last year. The 'clothing and footwear', 'DIY and gardening' and 'food and grocery' sectors are achieving the fastest growth.

"Viewing channels in isolation is more a recipe for failure than for success and a seamless fusion needs to be achieved between physical and online channels, " continued Gladding.

"While creating a multi-channel operation is by no means an easy task, the rewards for those that successfully attain this feat will outweigh the investment."

As a word of warning, the report points out that as shoppers spend increasing sums online they need greater assurance that their financial details are safe.

This is particularly important in light of the growing number of data leaks and phishing scams, where customers have divulged personal financial information to third parties in error.