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Christmas spending set to grow online - but not on the high street

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Online sales will rise by 16.3% this Christmas, while offline sales fall by 2.1%, new research predicts.

A report put together by the Centre for Retail Research for online shopping comparison site Kelkoo found Christmas sales were expected to rise by 1%, or £680m, to £69.09bn, up from £68.41bn in 2010.And, warned the report, if there is a repeat of last year’s snowy weather, and the disruption it caused, the growth forecast could be halved to £340m – or less.

Either scenario means a slower rate of growth than in previous years. Last year’s Christmas sales were 3.2% higher than the year before. But the growth that is seen is likely to come solely from online spending, which, predicts the report, will grow by 16.3%, or £1.88bn to £13.43bn this year. Last year online sales were up by 32%.

In all, internet shopping is expected to account for 19.4% of all UK Christmas spending in 2011, with one in five Christmas gifts bought online. That represents sales of £13.43bn, up from the £11.55bn spent in 2010. In 2011 it’s expected that just under 20p in every pound spent on Christmas will be spent online, up from 11p in 2008. High street sales, conversely, are expected to drop by 2.1% this year, from £56.86bn last year to £55.66bn in 2011. That’s a fall of £1.2bn.

Chris Simpson, chief marketing officer at Kelkoo, said: “Online spending is showing no signs of abating, and is mounting a real challenge to the dominance of the high street which, for third year running, is expected to see a decline. Internet sales across the UK are set to be more important than ever, with consumers spending record amounts online, and online commerce acting as the primary driving force for overall retail growth during the festive season.”

The report also covered nine European countries, including the UK, and found that the UK shoppers would spend the most in Europe this year, followed by Germany and France, representing 66% of European Christmas spending. All the nine countries are likely to see Christmas spending rise, with the exception of Spain where it is likely to dip by 0.1%. The strongest growth, of 2.7%, is predicted for Germany.

Simpson added: "The peak weeks of Christmas trading are critical for retailers, as many will earn up to 50% of their profits during this period. Throughout the year, the retail sector is a major contributor to the UK economy, employing more than 2.9m people. The retail industry is seen by economists as a leading indicator of economic trends and results this Christmas will prove vital in stimulating retail growth and aiding the UK economic recovery as a whole.”

Meanwhile, a survey from online private sales retailer Brand Alley found that most Christmas shoppers expect to spend the same or more than last year.

The survey found that 70% of shoppers think there will be significant discounts available before the traditional January sales and will be relying on these for their Christmas shopping, suggesting that stores which offer early discounts will perform well.

It also found that 63% of consumers intend to spend more or the same this year than previously despite the ongoing challenging economic conditions.

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