Shoppers take a shine to 'e-tailing'

Buying goods online is growing fast and should help cut prices, writes Marc Coleman, Economics Editor

Did you retail or "e-tail" this Christmas? City-centre Christmas shopping has many things to commend it. But bad transport en route, worse car parking when you get there and the veritable Hajj of shoppers can make it painful.

But if recent trends in the UK are anything to go by, e-tailing could be a big business of the future here too. A UK industry electronics retailer group, the Interactive Media in Retail Group (IMRG) released data recently showing that 24 million people shopped for Christmas presents online.

For 2005 as a whole, online shopping grew by 32 per cent per annum and the IMRG expects it to grow even faster this year.

There are two factors in this expansion. The UK has widespread availability of broadband for a start.

More important is the willingness of a range of retailers, from Tesco to Kelkoo, to exploit it. Those who fall behind are being punished. Falling high street sales at HMV contrast with 20 per cent growth of Amazon's UK arm.

Irish shoppers bought just under €30 billion worth of goods last year. Online purchases are still a tiny share of this total, about €250 million, a Central Statistics Office (CSO) source suggested recently.

But with the Commission for Communications Regulation suggesting that about €55 million was spent at Christmas time, it seems likely that the tendency to shop online increased towards the end of the year.

For refugees from Dublin's property market fed up with long treks to the capital, this phenomenon may become a habit and there may be gold out there in them there suburbs for retailers clever enough to move fast.

Customers are certainly doing this. One retailer was reported to have cleared 300 Sony playstations in a matter of minutes through online retailing.

Personal convenience and profits aside, e-tailing is also part of a productivity revolution. It takes a previously undefined benefit - the facility to avoid having to travel to shop - and turns it into something of marketable value.

While its saves the customer time and shoe leather, online retailing also usually ends up being cheaper than high street retailing. Bulk purchasing means higher discounts while bulk storage off the high street reduces or eliminates high street shop rental costs.

The revolution will be gradual, however. Poor broadband penetration in this country, as well as customer inertia and questions about the reliability of the postal service are three major obstacles to be overcome.

In the long-term, e-tailing is a win-win development for business, consumers and society in general. It will lower financial and time costs to consumers at one end of the retail chain. At the other, it will release massive resources for redeployment elsewhere in the economy.