Auction websites fail to benefit from economic slowdown as shoppers flock elsewhere

Auction sites are suffering a downturn in popularity. The last 6 months has seen the proportion of UK households saying they buy on eBay and other online auction sites drop by 4% according to the latest data from Point Topic’s series of consumer broadband surveys.

Auctioneers are being hit the hardest but other retailers can’t afford to be complacent. The percentage of people shopping online, while relatively high at 69% in January 2008, is static over the last 18 months.

“It is easy to get carried along by the enthusiasm for a dynamic sales channel like the internet but it’s important to take note of the limits of what is achievable,” says Pamela Varley, Research Analyst at Point Topic.

“It appears that a ceiling has been reached under the current conditions and retailers will need to ensure their business models reflect this reality. Historically this hasn’t always been the case,” says Varley.

The amounts individuals spend has also peaked with increasing numbers claiming to spend nothing at all online from month to month.

One piece of good news for internet retailers is that the absolute number of online shoppers in the UK is growing but this is entirely due to increasing broadband penetration. Retailers are holding online market share at best and many sectors are seeing a drop in the proportion of consumers willing to spend their money on the internet.

When questioned on specific purchases, as opposed to ‘normal’ behaviour the drop in auction site purchases was even more dramatic at 9% in the last 6 months.

“Consumers, particularly women, need to see and touch some items before they buy them, cosmetics, food and clothes top the list and a growing proportion of users are using the internet to check prices and availability before visiting a physical store. The internet is increasingly regarded as a part of the buying process rather than the start and end of it,” says Varley.

Online retailers will continue to pick up new customers but the rate will slow in the coming quarters. External economic factors will play a significant role but everyone needs to be aware of slowing broadband growth.