Top UK Retailer Pins Hopes on Web - eMarketer

Top UK Retailer Pins Hopes on Web
SEPTEMBER 19, 2008

Karin von Abrams, Senior Analyst

On September 11, John Lewis, the leading UK store group, announced a 27% fall in pretax profits for the first half of 2008.

Earlier this year, the company said it hoped to avoid the worst effects of the impending recession thanks to its loyal customer base, the opening of several new stores and significant diversification into Internet selling.

That hope in Internet sales may be well-placed. Retail e-commerce sales in the UK are predicted to reach £44.9 billion ($80.8 billion) in 2012, up from £19.5 billion ($38 billion) in 2008, according to Verdict Research data cited in Internet Retailing.

UK Retail E-Commerce Sales, 2002-2012 (billions of £ and % of total retail sales)

eMarketer estimates that B2C e-commerce in the UK will reach £94.2 billion ($169.6 billion) in 2012, up from £59.8 billion ($116.6 billion) in 2008.

Verdict's figures are significantly lower than eMarketer's because Verdict excludes air travel and tickets from its estimates, whereas eMarketer includes them. Verdict also gathers data from UK adults only, while eMarketer estimates include online sales to UK residents ages 14 and older.

The John Lewis group, owned as a cooperative by its employees, made pretax profits of £108 million ($191 million) in the six months to July 26, 2008, said a spokesman. Sales overall rose 3.6% to reach £3.27 billion ($6.38 billion).

The company's physical stores are bearing the brunt of the economic storm.

Operating profit at the group's department stores was down 34%, and at its Waitrose supermarkets—considered pricier for consumers than other major grocery chains—operating profit fell 8%. Price cuts and promotions, designed to appeal to worried shoppers, accounted for much of this loss.

But the group's Internet ventures continued their recent robust performance, strengthening hopes that online shopping will help John Lewis come through the current downturn in good shape. During the first half of 2008, online sales rose a healthy 30%.