Revolution in store as online retail sales soar

By Mark Potter - Analysis

LONDON (Reuters) - Store groups have to adapt or die as online retail sales soar, and time is running out.

Bricks-and-mortar retailers need to emphasise their advantages over cheaper Internet-based rivals, such as faster delivery and better customer service, and turn their shops into more attractive places to visit, analysts say.

They also need to expand their own Internet offerings into popular areas such as social networking.

Online retail sales in Britain leapt 38 percent to over 26.5 billion pounds in the first half of this year, driven by growing broadband penetration and the convenience of shopping at home, according to research by consultancy Capgemini and global e-retail industry body IMRG published on Friday.

That's equivalent to 17 pence in every pound spent, and Capgemini believes the Internet will account for between 30 percent and 50 percent of all retail sales in just five years, meaning store groups have to move fast.

"Somewhere along this journey retailers will reach a tipping point where the growth of the Internet seriously challenges the future viability of their business model," said Mike Petevinos, head of consulting for retail at Capgemini UK.

For some, this could mean store closures and job losses, but analysts believe there is a future for store groups, if they put the Internet at the heart of their strategy.

So far, many retailers have viewed their website as just one of a number of ways of selling goods.