Shoppers spent £133bn online last year, but the internet is hitting margins

 
Helen Cahill
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UK retailers raked in £133bn online last year as the internet's importance for the retail industry continued to grow.

Research from IMRG and Capgemini shows that shoppers spent £18bn more online in 2016 than they did the year before, a growth of 16 per cent.

Read more: John Lewis will cut staff bonus as profit comes under pressure

A substantial proportion of these sales were made in the weeks before Christmas, with £25bn being spent online between 13 November and 24 December. However, this figure does not account for how much shoppers returned.

The rapid growth in online shopping is providing an opportunity for e-commerce retailers such as Asos and Boohoo, but it also comes with its challenges. Last Thursday, Sir Charlie Mayfield, chairman of the John Lewis Partnership, said the switch to online is putting profits under pressure and that the company would have to cut its staff bonus.

"When Charlie Mayfield at John Lewis recently warned about the Partnership bonus, what he was referring to, although he didn't explicitly say it, was that as the share of John Lewis' online sales hurtles towards 50 per cent barrier and goes through it, their margins are going down," said retail analyst Richard Hyman.

"And John Lewis' online business is far more developed than most people's. Everyone is seeing their profit under pressure."

Read more: Debenhams share price jumps as it reveals sales hike over festive period

And, as if the switch to online wasn't complicated enough for retailers, the type of website they have to build has also been changing this year. Consumers are increasingly using smartphones instead of tablets to make their purchases. In December, sales made on smartphones increased 47 per cent year-on-year, with sales made on tablets falling three per cent.

Bhavesh Unadkat, consultant at Capgemini, said:

Few would have anticipated the decline in sales made on tablets, but with sales made through overall mobile devices generating over 50 per cent of visits, combined with the sweeping growth of both visits and conversations from smartphones, mobile continues to head towards being the number one sales channel.

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