U.S. News

Cyber Santa Shines Light in Europe's Retail Gloom


Santa Claus is as likely to be coming through cyberspace in Europe this year as down the chimney stack.

Online retail sales are predicted to hit a record high in Europe's three big economies -- Germany, France and Britain -- this Christmas and are proving one of the few areas to bring some cheer to an otherwise gloomy outlook for shopkeepers.

"Internet is booming at the expense of the high street stores," said James Roper, chief executive of London-based online tracker Interactive Media in Retail Group (IMRG).

"The story that we've heard in the past, that Internet retail won't take off because people want to feel the fruit and touch the cardigan is just not true."

British Internet tills are forecast to ring in sales worth 3.6 billion pounds ($7 billion) by the end of December. More than 180 million pounds was spent online this past Monday alone, the traditional start of the festive shopping season, double the amount of ago year ago, according to IMRG.

In a sure sign of market confidence in the trend, Britain's Tesco, the world's fifth biggest retailer with stores in 12 countries, chose this week to expand its one billion pound online sales business beyond food to clothing.

"It's performing very strongly, over double what we did last year," Tesco's Strategy and Finance Director Andrew Higginson told Reuters about its non-food offer of teddy bears to sofas.

It is a similar story in Germany and France.

French cyber shopping traffic jumped 79% in the past week with a quarter of online shoppers visiting sites run by retail giant PPR whose stores span entertainment and electronics mecca Fnac.com to the luxury Gucci Group.

In Germany, where traffic rose 63% last week compared with the pre-holiday period, according to tracker comScore Networks, with search site Web.de seeking out bargains from lipgloss to i-Pods.

BetterBroadband, Less Stress

Yet, as online stores show blistering growth -- up as much as 22% for the PPR group and 90% for British department store John Lewis -- many in the real world are slashing prices in a desperate effort to lure shoppers.

Euro zone retail sales rose 1.1% in October from a year ago, below a consensus estimate, and September growth was revised down, data showed on Tuesday, confirming household spending remains the economy's weak link.

Internet executives argue concerns over rising house prices, interest rates and taxes are helping their businesses to blossom with the promise of bargains and price comparison a boon to Christmas shoppers concerned about shrinking disposable income.

"As consumer debt remains an issue, more people are turning to the Internet to help them plan how much they're spending," said price comparison site Kelkoo's shopping chief Bill Rowley.

Better broadband coverage, improved delivery times and Internet security, greater ease with search engines and social networking sites like MySpace.com, as well as less stress are helping to fuel European online shopper confidence.

A survey this month showed 85 percent of British shoppers preferred clicks to bricks because they could avoid the "too stressful" high street. European stores are also finally establishing brands to rival Amazon on their own turf.

DSG International, Europe's leading specialist electronics retailer and owner of chains including PC World, Elkjob and Kotsovolos, is running a campaign promising "The Best of Both Worlds": instore shopping at Internet prices.

However, striking a balance between the worlds isn't easy.

Woolworths, the venerable British high street store, issued a pre-Christmas profit warning on Tuesday after shoppers' instore visits plunged. Still, Chief Executive Trevor Bish-Jones said he was "blown away" by demand for its new multichannel offer that allows customers to buy online and pick up in store.

"If I had said to people three months ago that we would now be the fastest growing internet retailer they would have said 'Trev, you are on drugs'," Bish-Jones said.