Almost a quarter of the UK’s retail sales will take place over the internet within four years, according to a new report.
By 2016, predicts the Boston Consulting Group report, some 23% of UK retail sales will be made online, bringing in total revenues of some $230bn (£144.6bn). The report suggests UK internet retailing will more than double in value from the $102bn turned over in 2010, when the sector accounted for 13.5% of UK retail sales.
The figures came in a report, The $4.2 Trillion Opportunity: The Internet Economy in the G-20, that showed the UK was the most internet-based economy in the world.
The study, part of the group's Connected World series of reports, found the internet was worth $187bn (£117.6bn) to the UK economy in 2010, equivalent to 8.3% of the country’s GDP. That’s more than twice the 4.1% average figure for the G20 nations as a whole. Within that total, online retail accounted for $102bn (£64.1bn), or 13.5% of total UK retail, according to the report.
By 2016, the report predicts, the internet will be worth 12.4% of UK GDP, or $347bn (£218.3bn), compared to 5.3% for the G20 as a whole. By 2016 it predicts revenues from online shopping will rise to $230bn (£144.6bn), or 23% of total retail sales.
The UK is followed by South Korea, where the internet economy accounts for 7.3% of national GDP, and China (5.5%), and, says BCG, in each of these countries, the internet economy would rank among the top six sectors in terms of GDP share.
On a wider scale, the internet economy is expected to contribute $4.2 trillion (£2.64 trillion) a year to the total GDP of the G20 by 2016.
“If it were a national economy, it would rank in the world’s top five, behind only the U.S., China, India, and Japan, and ahead of Germany,” said David Dean, BCG senior partner and a coauthor of the report.
He added: “The internet economy offers one of the world’s few unfettered growth stories. Policymakers often cite GDP growth rates of around 10 percent per year in the developing markets, but they look past similar, or even higher, rates close to home.”
Seamus Whittingham, managing director for ChannelAdvisor EMEA, said: “The BCG’s research backs up what we have been seeing across our global customer base; that the UK is embracing online retail a lot faster than other leading economies. For many retailers, both large and small, online sales have been their biggest area of growth in recent years and more and more consumers are becoming accustomed to shopping online whether at home, work or on the move, using their smartphones or tablets.
“Looking at the current rate of growth, the prediction that one in four UK purchases will be made online by 2016 seems realistic. However, it’s important to realise that the opportunity isn’t confined to these shores. UK retailers are increasingly looking to expand their sales overseas. Online sales channels such as eBay and Amazon are making it easier than ever to reach new potential customers at home and abroad and the UK’s leadership in the e-commerce space means our retailers are perfectly positioned to exploit this opportunity.”
Eric Abensur, chief executive of ecommerce platform company Venda, said: “It comes as no surprise to find the British internet economy is booming. As broadband penetration, pervasiveness of mobile devices and public wi-fi connectivity increase we’re seeing huge growth in online sales amongst our client base, far higher than stated by the Boston Consulting Group.
“When it comes to George Osborne’s upcoming Budget statement, the Government would do well to acknowledge and build upon the wealth generated by the internet. Improving internet access and speed alongside helping businesses make the move to online could see the internet become a powerful catalyst for growth as well as a truly significant source of income.
“The launch of next-generation mobile internet will be the next huge leap in the value of this sector. The eventual 4G spectrum auction will provide huge impetus for growth of the mobile commerce sector. If the government is looking for areas to galvanise growth they need look no further than pushing for the auction to happen sooner rather than later.”
Gabriel Hopkins, head of ecommerce products at WorldPay, said: “Every day we hear reports that consumer belts are tightening due to the current economic conditions, but eCommerce continues to grow at a healthy rate, particularly in the UK. The results from the Boston Consulting Group supports our recent research that customers are spending vast amounts online, and use online channels to regularly purchase anything from fruit to fashion.
"From a payments perspective, mobile is a key growth area for internet spending. UK consumers are predicted to be the biggest mobile shoppers in Europe in 2012, and have been for a couple of years already. There is a huge appetite for shopping online anytime, anywhere, which the explosion in mobile devices enables. The rules are changing for retailers, and they need to make sure the needs and demands of consumers are met in order to continue this growth.”