Consumer spend at the major online retailers is likely to fall far short of the industry’s expectations, according to leading European online payments system, Moneybookers.
The UK’s 28 million online shoppers say they have spent £9.4 billion online this Christmas according to research conducted by Moneybookers just before the big day. This total falls 30% short of the amount estimated by the Interactive Media in Retail Group (IMRG) in November 2008, which forecast online sales of £13.16 billion.
While the IMRG expected the average internet user would spend £470 online this Christmas when it published estimates two months ago, the more recent Moneybookers data found that they actually spent just £337 each online for the festive season.
Furthermore, consumers have spent less during Christmas in 2008 than they did in 2007 as budgets have tightened, spelling further gloom for retailers – both those online and on the high street. While one-in-five (19%) said that they expected to spend more online in 2008 than they did a year ago, one-in-four (27%) said they had spent less. Half (53%) said that they spent the same amount this year.
Nikolai Riesenkampff, joint-Chief Executive of Moneybookers, said: “The past four weeks have been tough for online retail – much as it has been on the British high street. While online sales will have grown in 2008 – particularly as consumers have turned to the web in an effort to cut the cost of the festive season – they have done so at a slower rate than during previous Christmas seasons.”
“Our data on consumer spend shows that the last two months – since the IMRG ran its research – have seen online shoppers rein-in their festive spend as rising household costs and fears about the economy set in. That said, online retailers will be celebrating as total sales have edged nearer double-digit billion amounts. So although revenues may be lower than hoped for, they are still a substantial part of the economy and further validation of the importance of online retail.”
Although spend at Christmas overall is down, Moneybookers itself has seen no drop-off in volumes – they were up 100% year-on-year during November and December in 2008. The business has benefitted from a combination of new internet users turning to “e-wallets” as a more secure way to make online payments and an enlarged base of online merchants that offer Moneybookers as a payment mechanism.
Nikolai Riesenkampff concludes: “Online retailers should be looking at managing costs going into 2009 and focussing on driving better margins as growth slows. Clearly, one way of doing this is reducing the cost of fraud, which we estimate to cost online retailers 1% of total revenues and of attracting those new to online shopping by offering more secure methods of payment.”