Comment: E-trade rivalry hots up

A number of major online retailers have announced greatly improved financial results this year.

The Argos Group saw its online sales reach £104m for the six months to 30 September, more than double the sales of the same period in 2001. Retail group Kingfisher, which includes B&Q and Comet, saw its Internet sales soar 150 percent during the first half of 2002 compared with the same period last year. Both Tesco and Amazon have also seen good increases in sales this year, and Sainsbury's has expanded its online site to offer CDs, DVDs and books.

I can understand why so many people shop online with these retailers. Aside from Amazon, they were all major brands long before e-commerce took off. And Amazon itself is now one of the biggest Internet-related brands around. On top of the brand advantage, the online retailers give people a chance to do the weekly shopping without the prospect of long queues, unruly children running riot, trolleys with a mind of their own, and lugging goods to the car afterwards.

Online travel booking has also proved a more tempting option for consumers this year. Internet travel site Expedia reported a profit of £13m and doubled bookings for the third quarter of this year, compared with a loss of £3m for the same period last year.

Again, I can see the attraction of the Expedia site. It is easy to enter a few details such as date, destination and departure airport on a Web site and be presented with a variety of possible holidays or flights. This compares with the alternative of spending hours sifting through brochures to find some suitable options, and then having to fight through complex pricing and supplement tables. And booking a holiday through a physical travel agency requires sitting and waiting while the agent searches the computer system, so why not just do it yourself? Expedia users have the option of searching for flight, hotel, car or a combination of the three.

Bumper Christmas

While individual retailers report good sales, total consumer spending online is also increasing. According to the Office of National Statistics, UK shoppers spent £6.6bn online last year, compared with £4bn the year before. If this trend continues, many online merchants will be expecting a bumper Christmas this year.

I just hope that these retailers, and others who have been successful so far, continue to review their online strategies and don't rest on their laurels. As the economy picks up, it's likely that more companies will want a share of the Internet shopping pie, and will try to compete with the current market leaders. Sainsbury's recently promised to sell CDs at lower prices than those of rival Internet stores. Other online retailers must also be prepared for price-cutting from competitors fresh to the market.

I'm sure that as time goes by more and more people will use the Internet to order CDs, book holidays and do their weekly shop. There will therefore be room for existing online sites to expand, and for other retailers to launch e-commerce operations. But that doesn't mean those on the A list of Internet retailing at present can't be toppled if they fail to keep up with consumers' needs and expectations, and the latest e-commerce developments.

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