Alan's musings : home

Alan's musings ... some personal views and rants

on this digital marketing malarkey

Online retailing - what is it,
and how important is it?

Obviously, being involved in digital marketing - and writing books on the subject - I track the industry quite closely. One thing that has interested be for a while is the impact of 'online' on retailing. In the early days online represented only a small percentage of overall sales - mostly in niche markets. However, for a whole multitude of reasons - not least that more users now have broadband - online is moving into the wider context of retail sales.

What prompted me to write this article was that in the summer of 2008 statistics were coming out suggesting that online was getting close to representing 20% of all retail sales. This was significant in that many commentators suggest that 20% represents the 'tipping point' in the industry. In other words, when online equals one fifth of sales then all retailers - and as I write this in October 2008, many still doubt the potential of the Internet - will move resources online. This, in turn, will increase online sales and so move that 20% figure still higher.

The problem I have is where these figures come from. Here are my comments on the subject taken from my book, Internet Marketing - a Practical Approach:

'Before considering the role of the Internet in any retail strategy, let's consider its impact so far. Throughout this book I have attempted to present fact and figures that are both relevant and accurate. However, for this particular subject the data is complex or biased, resulting in it being confusing - or all of these. The complexity comes from different bodies' interpretation of what 'retail' is within their research. For example, some include services such as online booking of holidays or flights whilst others include only of tangible products. This has an obvious impact in that just one family trip booked online would be the equivalent of dozen, if not hundreds, of books or CDs. Also, do downloads of music and games count as online retail sales - and what about Internet gambling? Other statistics, such as those from the UK's Office for National Statistics (ONS), include 'online' with other 'non-store' retail figures. The problem itself is made more difficult by the researchers not always publishing their own definition of what they have counted as retail. Bias comes in the form of research published by organizations that are in some way involved in - or would gain from - online retailing, and so may have a natural inclination to be positive about any numbers involved'

Also from the book are the following statistics:
- US government figures that suggest online represents only three per cent of total retail sales
- The British Retail Consortium (BRC) saying that online sales for 2007 were six per cent of all retail sales
- A 2008 report released by Shop.org suggesting that e-commerce would account for 7% of all retail sales in that year
- The Interactive Media in Retail Group (IMRG - the industry body for the e-retail industry) and Capgemini put the 2008 figure at 17 per cent

This web page is here to help keep this section of my book - and the issue of 'what is online retail' - up-to-date.

In its press release to celebrate 35 years of trading UK retailer Argos said that the Internet accounted for 21% of sales. Now if one of the pioneers of multi-channel retailing has 21% of sales, surely 17% of ALL retail sales seems a bit on the optimistic side? Perhaps UK retailer John Lewis' 12% of total sales is more feasible? [quoted in an interview with Luke Kingsnorth, Development Manager, Online Marketing].

Forrester Research retail analyst Sucharita Mulpuru (quoted on stores.org) refers to 'non-travel-related online sales' when talking about online sales. This is relevant in that Forrester is a key player in industry and market research and analysis. More specific is research published by Verdict Research, who present the components of 'online retail spending' as: books, clothing & footware, DIy & gardening, electricals, food & grocery, furniture & floorcoverings, health & beauty, homewares, music & video and other markets.

The IMRG Capgemini Index [www.imrg.org] tracks 'online sales', which it define as 'transactions completed fully, including payment, via interactive channels' from any location, including in-store. These sales are predominantly internet-based today, but the Index remains ready to record e-retail sales conducted via whatever interactive channels the market may embrace in the future. [AC's comment on this : But what if a customer goes into their local travel agent and books a flight on easyJet whilst on those premises, the agent will make the booking online. Does this count as an online sale?]

April 2009. Having recently seen an article quoting 'Internet shopping' representing 3.4% of total retail sales in the The Retail Sales Index [RSI - this is for the UK], I thought I would go directly to the government department that compiles these statistics and ask 'what is counted as Internet sales in the RSI?'. The good folk at the Office for National Statistics were [fairly] quick to respond to my enquiry, pointing me at a document that include the following:

'The RSI covers sales only from businesses registered as retailers according to the Standard Industrial Classification (SIC), an internationally agreed convention for classifying industries. The retail sector is division 52 of the SIC 2003 and retailing is defined as the sale of goods to the general public for household consumption. Consequently the RSI includes all internet businesses whose primary function is retailing and also covers internet sales by other British retailers, such as online sales by supermarkets, department stores and catalogue companies. This means that the RSI covers three of the main types of household internet spending
a) spending on goods from specialist internet retailers
b) spending on goods from store-based retailers
c) spending on goods from catalogue-based mail order retailers'.

But importantly ...

'The RSI does not cover household spending on services bought from the retail sector as it is designed to only cover goods ... on-line sales of services by retailers, such as car insurance, would also be excluded'.

So there we have it. As I suspected, services are not counted in 'official' figures, but - it would seem - they are included in the likes of the IMRG figures.

Which do we take notice of? As an e-marketer, I would use the bigger numbers - but I would say that wouldn't I? Whilst I appreciate that the SIC has a role to play in segmenting industries, I think that if a person-in-the-street [ie not a B2B transaction] pays for something on a website then that is online retailing - or is it e-commerce?

November 2009. I forgot all about cars!

May 2010. Mothercare announces that online is now worth more than 20% of its UK business. Note, however, that this includes orders placed online from within their stores. Kind of blurs the boundaries of e-tailing a little - but is a definite vote for multi-channel retailing.

January 2011. For a whole host of offline reasons, Christmas 2010 saw online sales reach a new peak. Here's the data from the USA; Online Holiday Spending Sets Record and the UK; Christmas shoppers spent GBP2.8bn online. Also out at the same time was this report: 2 in 3 Web Users Pay for Content. It includes a list of digital products bought online, some of which I had missed in my comments above. For example; music, software, videos/movies/TV shows, ringtones, mobile phone apps, newspaper, magazine/journal articles/reports, photos, games and, as e-readers become more common, e-books should all be counted as retail sales, I wonder if they all appear in the various statistics?

September 2012. Perhaps Waitrose looks to take 6% of sales over the internet makes the 'what is online retail sales' issue a little clearer. Or maybe not?

January 2013. Online sales was a big issue over the Christmas of 2012, More than 10% of Halfords sales now made online is just one story which helps give a realistic view of the subject of this musing.

So popular are online sales that I don't think it is worth continuing this thread after this date - though what is included in the measurement of 'online sales' is still an issue.

February 2017. OK, so I said I wasn't going to bother updating this page - but it is consistently in the 'top 5 most visited' pages of this website ... so someone's finding it interesting and/or useful. That being the case - from time to time - I'll add anything interesting that I come across. Starting with ...

I came across statistics today that I thought was relevant.
The US Census Bureau announced that U.S. retail e-commerce sales for 2016 represented 8.1% of US retail sales. Yep, that's a shade over eight percent. Hmmmmm. Note however, this does not include food, travel services and ticket sales - but still, 8.1%, that's really low. See the report on US Census Bureau News . The numbers for other parts of the world are equally unimpressive:
Asia Pacific - 12.1%
Western Europe 8.3% - don't forget the UK is 20%+ ... so there are countries that are well under 8.3 for that to be the average
Central and Eastern Europe 3.4%
Latin America 1.9%
Middle and East Africa 1.8%
[Source: online buyers in selected countries ].
Statistics are sketchy, but China seems to be at around 20%. The averages on that make the figure significant as only around half of all Chinese are online [Source: Internet World Stats ].

December 2018. Although it is not on exactly the same subject as this page, The Top 5 Most Popular Categories Purchased Online adds to the issues raised earlier.

January 2019. That sweater you don't like is a trillion-dollar problem for retailers raises another issue as it purports that around 15 to 40 per cent of online purchases are returned. So, when online sales numbers are quoted, is that gross sales or net sales after returns are deducted? Even if the actual returns figure is at the lower end of this proposal, that brings the real sales figures down a significant amount.

June 2019. The influential annual Internet Trends report states that 'e-commerce as a percentage of retail sales' is 15%. However, the US Census Bureau quoted above says that in 2016 the figure was 8.1%. The graph shown in the Internet Trends report suggests that in 2016 the figure was around 12%. Hmmmm ... I think you'd best re-read this page re what is being counted as online sales and what isn't.

However ... I keep reading that around half of online sales in the US are on Amazon. Doesn't say too much for every other shops in America does it? That said, of course, if online represents around 15% of retails sales, and Amazon gets half of it ... 7.5% of a massive number is still a pretty massive number. Actually, my rough [very rough] calculation is that 7.5% of total retail sales is around 409 million dollars.

July 2021. Post COVID 19 online sales in the UK are reported to have risen to 31.8% of all retail sales. This is a drop from the artificially high 'lockdown' sales that were so unprecedented that I think we should ignore their relevance. So: on the positive side - lots of whooping and hollering from the e-commerce supporters who are shouting '32 percent' from the rooftops. On the realistic side: yes, online is no longer a single-figure percentage that can be ignored ... but it's still [only] a third of all sales. The majority of sales are [still] in physical shops.
As is the case for the whole of this page; a question. I wonder what percentage of that 31.8% was delivered to buyers - and how much was collected from a real-life shop? And if we looked at the big-ticket items what percentage of those was delivered or collected.

March 2023. There's been a lot of stuff on this subject since the end of COVID 19 lock downs - much of it in the general media. However, I thought that How grocery retailers are successfully merging bricks and clicks is worth a read [note, however, that the data used is a year old]. This report focuses on Grocery, saying that 12.6% of grocery sales were carried out online in March 2022. OK, so that's a significant amount of pounds spent, but still leaves close to 90% being in-store - and that's after a pandemic kept people out of the shops for a sustained period. 

How to cite this article:
Charlesworth, A. (2020). Online retailing - what is it, and how important is it? Retrieved [insert date] from AlanCharlesworth.com: https://www.alancharlesworth.com/Alans-musings/online-retailing

This page was first published around 2008 but has [obviously] been updated since then.