Internet update

Citation

Almond, N. (2006), "Internet update", Property Management, Vol. 24 No. 4. https://doi.org/10.1108/pm.2006.11324dag.001

Internet update

The past 12 months have been interesting for anyone who monitors the retail sector. Weaker consumption growth and retail sales have made their mark on the high street, although one could question some of the headlines published in the mainstream press of a so-called “Armageddon” on the high street. Placing aside questions of how tough conditions really are, there have been question marks over how accurate retail sales figures are, and whether they truly reflect internet sales. This also begs the question as to how this may impact real estate markets. It as not so long ago that people talked of many high street names being run off the high street by the new world e-commerce ventures. A quick search on the internet comprising the terms e-commerce and real estate highlighted a couple of articles back to the late 1990s/early noughties covering research in this era. At that time the performance of retail suffered as a consequence, although it has made up ground in recent years. So what do we know now of retail sales on the internet?

According to the boffins at the Office for National Statistics (www.statistics.gov.uk), more than 64 per cent of adults in Great Britain accessed the internet in October 2005. Of those who had accessed in the past three months 61 per cent had ordered goods, tickets or services, with those aged 25-44 most likely to buy online. Further, 48 per cent of men and 39 per cent of women had used the internet for banking. With figures now showing broadband connections overtaking dial-up connections as the norm for accessing the internet, this phenomena can only grow further.

There are now many household names on the internet, including the likes of book to electronics retailer Amazon, to the auction site e-bay. Many of the high street retailers also have a presence and are now making significant sales over the internet. It is not just consumers who are using the internet to conduct sales; businesses too are using the internet for the sale and procurement of services. The ONS produces an e-commerce survey (www.statistics.gov.uk/downloads/theme_economy/ecommerce_report_2004. pdf) which highlights that wholesale, retailing, catering and travel make up the bulk of sales for individuals; £10.7bn in 2004 out of total household internet purchases of £18.1bn. Businesses account for a much high proportion of purchases on the internet, a total of £53bn in 2004; although as with individuals it remains a small proportion of overall activity (less than 5 per cent). But how accurately do we know how much in spent online?

Luckily, there are various sources of information to help. The ONS has for starters recently undertaken a survey of this, which is welcome given the criticisms levelled at the ONS over the past year. Their paper “Internet spending: measurement and recent trends” is available to download from their web site and makes interesting reading, especially for those wanting to grasp a better handle on the statistics.

The retail sales index does not distinguish between means of purchase (it only captures total sales volumes), although this is not to say it does not capture internet sales. The index does capture sales from store-based retailers and catalogue/mail order retailers, together with specialist internet retailers whose primary function is retailing. Internet sales by supermarkets would be covered in the “food retailers” category, whereas specialist internet providers are covered under “non-store retailing and repair”. There are some exclusions from the sale index; these include services, e.g. insurance. Those retailers specialising in downloading music and ring tones are also excluded if they are involved in the production and processing of such material.

Finding figures for different companies can be tricky. I did a quick trawl of a couple of retailers. In their 2005 annual report, Tesco (www.tescocorporate.com) reported online sales of £719m, with over 750,000 customers using the internet for gifts or groceries in the run-up to Christmas. Neither Sainsbury's or John Lewis appeared to split down their online sales figures in their latest annual reports. A quick news search did not reveal much either. Similarly, figures could not be found for next, although they do report the internet accounts for around 30 per cent of their directory sales, and that they expected online sales to reach £200m in 2005. Clearly, finding true values is tricky, but as sales rise, we should see improvements in reporting.

I also ran a quick search on Google to see what else came up. Typing in the words “retail internet sales” and choosing pages in the UK, revealed a number of newspaper articles, primarily in the Daily Telegraph and Guardian. The search also provided a press release by the Interactive Retail Media Group (www.imrg.org) highlighting their internet sales index.

For those looking to the future, more specialist reports are available. As I prepared this editorial I received an e-mail from Verdict, publicising their e-retail 2006 publication. They report that internet retailing is the fastest growing sector of UK retail at present (though hardly surprising as it comes of such a low base). The report highlights future growth across various market segments, including DIY, electrical, grocery and music and video, up to 2010, together with some past history. Comparisons across different retailers and their current market share of activity are also provided. For those wanting to gauge future demand and assess the likely impact on various high street sectors will find the publication of use.

Unfortunately, when it came to real estate in the UK, I largely drew a blank in terms of recent research. Perhaps, the most comprehensive of reports were available from the College of Estate Management (www.cem.ac.uk). Simply take the research link and then research reports and feel free to browse under the different years. For retail the last report was in 2002, although more recently other reports on the internet, technology and real estate are available. It is worthwhile browsing the various real estate agencies/consultancies to see what they have to offer. Some reports may be a little dated, but useful background knowledge.

The view expressed are those of the author and not those of Jones Lang LaSalle.

Nigel AlmondAssociate Director Jones Lang LaSalle E-mail: nigel.almond@eu.jll.com