Introduction
Internet shopping is a phenomenon within modern retailing. During a relatively short time it has surpassed (1) catalogue sales and become a challenger to the high street, with consumer demand putting pressure on stores to adapt to an online market in addition to providing a high street presence.
Like the rest of the UK, growing numbers of consumers in Wales are discovering the benefits of Internet shopping. Evidence suggests that consumer confidence is also growing, as people shop more frequently and are prepared to spend greater amounts.
People who shop online are growing increasingly knowledgeable about what to expect, realising that the Internet can provide them with a range of goods, at prices cheaper than the high street, without having to leave the house.
This is of particular significance in Wales, with its areas of rural isolation and urban deprivation (2). The Internet has bought back goods and services to areas that have seen the closure of many local services such as village shops and post offices.
But there are still concerns that need to be addressed to encourage more consumers to take advantage of the benefits that Internet shopping can offer.
Growth of Internet Shopping in Wales
A survey commissioned by the Welsh Consumer Council shows that by March 2006 28% of the population of Wales had shopped online over the last 12 months. As a proportion of those who use the Internet, this equates to some three in five (60%) people. Internet shopping is therefore an activity that most people who use the Internet partake in.
Although Figure 1 below does not show any significant changes in the numbers of people shopping online over the last three years, there are nevertheless developments occurring in online shopping.
[FIGURE 1 OMITTED]
There is evidence to show that the amount of money being spent online and the value of items bought is increasing. This reflects the overall trend towards greater consumer confidence in the Internet for retail purposes.
Estimates from the Interactive Media in Retail Group (IMRG) anticipate that Internet spending in the UK will continue to increase in 2006, reaching GBP26 billion by the end of the year, compared to GBP300m in 1999 (3).
Much of the development has come from three interrelated factors--increasing use and promotion of the Internet in Wales, investment by retailers and consumer demand for online shopping.
The Welsh Assembly Government has run a number of high profile campaigns aimed at encouraging use of the Internet (and particularly broadband), as a means for accessing goods, information and services. A significant amount of money has been invested to tackle exchanges that stand in the way of achieving 100% broadband coverage. This will have obvious benefits for those people wanting to shop online.
However, while increased website investment by retailers should not be underestimated in the growth of Internet shopping, the major force behind the expansion of the Internet has been led by consumers driving the demand for more online services.
Consumers are in an excellent position to tell retailers exactly what they want, and are free to switch to another supplier if they are not satisfied. Compared to other forms of distance selling, such as mail order (4), the Internet can provide a vast supply of information empowering consumers to make informed choices on how much they should be paying for goods and services, what level of service they can expect to receive, and what to do when things go wrong.
However, although more and more people are shopping online, as our research below shows, it remains predominantly the pursuit of the middle aged and wealthy.
People who Shop Online
As a general profile of people who have shopped online over the last 12 months, our figures show that people living in the more rural areas of mid and west Wales are the most likely to have shopped online. As would be expected, people in the higher social classes of AB and C1 are also more likely to shop online.
People in the mid age groups who use the Internet are most likely to have shopped online over the last 12 months (66%), which is probably related to the availability of disposable income in these age brackets. Younger people are slightly less likely to shop online (59%), with older people being the least likely (47%) (5).
However, the number of older people who shop online has risen since last year, possibly related to increasing use of the Internet by peers and educational campaigns providing basic Internet skills such as e-mail and online shopping. Organisations working on behalf of older people are increasingly emphasising the advantages of going online and demonstrating how the Internet can be relevant to older people's lifestyles.
Meeting Consumer Needs
Consumers often begin using the Internet to do their product research, i.e. to shop around for cheap deals and compare prices before gaining the confidence to make a transaction.
Data suggests that this is a key reason why people use the Internet to shop, and affords them the opportunity to make informed choices about the products they buy. Figure 2 overleaf shows that convenience, value for money and choice are also important features of Internet shopping.
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Once the initial transaction has been made, and if the experience has been as positive one, most people continue to shop online and increase the value of the purchases they make. Research conducted by the Welsh Consumer Council shows that over a quarter (26%) of people who used the Internet in 2005 said that they would do more shopping online in the coming 12 months, compared to only two percent who said that they will do less.
Figure 3 below shows the type of products that consumers in Wales are purchasing on the Internet. The findings are similar to the 2005 survey, with hard copies of music and DVDs and videos being the most common purchases.
[FIGURE 3 OMITTED]
Consumer Concerns
For some people, word of mouth is a good guide as to whether an online retailer can be trusted. For other people, stories about credit card fraud and dubious websites are enough to put them off.
The two main reasons people in Wales give for not doing their shopping online are that they do not trust the security of paying online (41%), and they do not like the experience and prefer to see items in the high street (34%). Although there is little which can be done to encourage someone to use the Internet if they just don't want to, for people who are put off by the security of shopping online there are some steps which can be taken to improve the security of transactions.
In 2005 the Welsh Consumer Council, with the assistance of IMRG and Consumer Direct, produced a leaflet highlighting simple steps for improving security while shopping online. The Welsh Assembly Government distributed the leaflet during their community based training programmes to people with little or no experience of shopping online.
Similar advice is available from trading standards and Consumer Direct. However the main concern is in ensuring that people have the information at hand before they start shopping online. Preventing breaches of security is much easier to do than trying to resolve issues afterwards.
Retailers also have a responsibility to customers to provide basic information on their online security measures, and to guide the consumer smoothly through their transaction. Research shows that consumers are most likely to fall out of a transaction at the last step of the process; so additional reassurance by retailers at this stage could secure more sales.
Conclusions
Internet shopping has become an activity that most people who use the Internet engage in. It has already outperformed catalogue sales, and is now posing a challenge to the high street.
Consumers are a powerful driving force behind the growth of the Internet, but there are still concerns about online security that are deterring many people from shopping online.
This is an opportunity for retailers and consumer advocacy organisations to come together to improve perceptions of online security that could lead to a better shopping experience for consumers and ultimately an increase in sales.
Survey fieldwork was carried out by Beaufort Research Ltd, who interviewed on average 1,000 adults (aged 16 and over) across Wales between March 2004 and March 2006.
(1.) Interactive Media Retail Group (IMRG) claims that internet shopping overtook catalogue sales in terms of total sales in 2004
(2.) Objective one areas are west Wales and the Valleys--classified as high priority areas of high deprivation, with GDP less than 75% of the European average
(3.) Financial Times, 6th April, 2005 Online shopping expected to grow by 35% this year
(4.) A comprehensive study of credit use in Wales by the Welsh Consumer Council shows that one in four households in Wales in 2002 used mail order shopping. Welsh Consumer Council (2003) Credit Use in Wales. Research from IMRG suggests that total online shopping sales overtook catalogue sales during 2004.
(5.) Age groups are defined as follows: young people 16 to 34, mid age as 35 to 54 and older people as 55 and over. Figures refer to people who personally access the internet, and as a proportion of those who have shopped online over the last 12 months.
Sarah Richards, Senior Policy Officer, Wales Consumer Council
