Online stores are where the money's @

Published on Monday 23 January 2006 11:58

WINNERS and losers - every year, the retail reporting season splits the high street in two. And, on the face of it, Christmas 2005 was no different.

Store chains breaking out the bubbly included Dixons, Sainsbury's and Jenners owner House of Fraser, while the likes of JJB Sports, HMV and garden centre operator Dobbies were more likely to be drowning their sorrows with a pint of flat ale.

Scratch deeper, though, and a common thread emerges - one that has the word "challenging" woven right through it.

Even Tesco's seemingly upbeat trading snapshot - highlighting a 5.7 per cent surge in underlying sales - gave some cause for concern.

Analysts warn the UK's biggest retailer faces a battle to keep adding market share. The group's finance boss, Andrew Higginson, admits that in 2006, Tesco will be "fighting for every pound".

A resurgent Sainsbury's is just one of the challenges facing Britain's "King Kong of the high street".

A much bigger threat, and one facing store-owners the length and breadth of the land, comes from the explosion in armchair shopping. Sure, Tesco.com is a great example of a bricks-and-mortar business taken online, and a smart way for time-starved types to do the weekly shop, but it's far from being number one on the net.

Canny surfers shopping for CDs, DVDs and electrical items know where to track down the real bargains. And their numbers are growing.

Figures released on Friday by the Interactive Media in Retail Group lay it on the line for those sceptical of the virtual mall.

UK shoppers spent a staggering 5 billion online in the ten-week run-up to Christmas - a rise of 50 per cent on the year before. Web-based shopping now accounts for almost ten per cent of all retail spending and is set to escalate.

IMRG forecasts that e-commerce will grow by 36 per cent in 2006, with sales worth some 26bn.

Many "traditional" retailers appear quick to blame a competitive trading environment and a tightening of the consumer purse-strings for disappointing sales.

As to the former, they may have a point. Some observers believe the retail sector is overstocked - there are simply too many outlets, particularly out-of-town warehouse operations, chasing a population that may be on the move but is hardly swelling in size.

And are we really spending less these days? Judging by the measly state of most people's bank balances - or rather the size of their overdrafts - I think not.

No, the message to the retailing luddites is plain. Embrace the internet or die.