Online retail best placed to weather spending cuts

IMRG claims online retail will stay strong despite expected deflation and higher VAT

Online retail will stay strong, says IMRG

Last week’s Comprehensive Spending Review saw the government make wide-ranging budget cuts that will affect every area of society. These cuts will lead to difficult trading circumstances, particularly as VAT will increase to 20 per cent. However, according to e-retail membership community IMRG, the online market has shown remarkable resilience to the financial crisis and recession so far.

The October update of the IMRG Capgemini e-Retail Sales Index revealed a rise of 24 per cent for September compared with the same month last year. Sales between January and September for 2010 are up 16 per cent too, surpassing IMRG’s earlier forecast of 13 per cent. As a result of this strong performance, IMRG estimates that total online spend in 2010 will be £57.8bn, up from £49.8bn in 2009.

Andrew McClelland, director of operations at IMRG, said that online retail has weathered any financial storm thus far owing to the idea that it often promises better choice, value and convenience than high street stores.

“If you look at it from the consumer’s point of view; if you’re a little worried about your job security or are in the unfortunate position of having lost your job, when you look to tighten your belt, you’re always looking for those things: value and convenience,” he said.

“So if you’re looking at watching the pennies, online is a great place to shop, because of the range of products and suppliers that you can find.”

He added that the definition of value is not set in stone, and is not just about price, citing the success of John Lewis’s online operation.

“It is not necessarily the cheapest in the marketplace, but it offers good guarantees and warranties, good customer service, good product availability and a lot of information at your fingertips before you make a decision,” said McClelland.

He added that online retailers looking to continue growing in the likely difficult financial climate of the next few months should focus on maintaining good cost control, understand customers’ behaviour when they come to the site, offer good delivery promises and stick to them.