Online Sales Rise 8.3%, Says BRC

The British Retail Consortium said this morning that online sales rose 8.3 per cent in April in what was a very slow month for retailers. 

The rise compares to a 0.6 per cent decline in total UK retail sales last month and a 9 per cent rise in online sales in the same period last year. 

Total sales figures for April, adjusted for 0.4 per cent inflation, fell 1 per cent and over the three months, which irons out the impact of a shifting Easter, growth was 1.6 per cent.

Last month the BRC, which includes all non store sales including phone and mail order, said online sales increased by just 6.6 per cent. That compared to an 11.5 per cent increase reported by the Office of National Statistics. Both figures represent non-grocery spending.

Comment: it is worth mentioning that the BRC figures are beginning to look a little low compared to other sources. Two other measures for March, both of which track a wider spend than just store sales, showed even higher figures. 

Firstly, Barclaycard said the increase in spending it tracked, about half of all online sales, said the rise was 12 per cent. Secondly, the internet retailing association the IMRG said the increase was 13 per cent. We'll keep you updated when these other figures are released for April. 

We're tempted to say that the ONS figure is the best measure of pure 'online' retailing. The reality is that all the figures tell us something (the IMRG includes holiday and flight spending in its figures, for example, as we suspect does Barclaycard) and over the coming weeks we'll try to dissect exactly what we can and cannot see from each of the figures.. 

US Online Tax Rules A Step Closer

The US Senate last night voted overwhelmingly in favour of new tax rules for online purchases.

The Democratic-controlled Senate voted 69 to 27 to support the measures. However, it is expected to face greater resistance in the House of Representatives. 

The rules would enforce state tax laws on spending at US and overseas web sites. It will mean that any retailer selling to US citizens, including online firms in the UK, will be expected to collect tax on the purchase and send it to the state where the purchase was made. 

It has been identified as a potentially 'significant burden' for smaller UK retailers, according to London-based fashion web site Asos at the weekend.  

Republican politicians have raised the issue as a banner against increased taxes and it has also met resistance from online retailers including Ebay. Traditional retailers including Wal-Mart are supporting the change which they say has long since favoured online-only retailers such as Amazon. 

Amazon has resisted the plan until recently when it has begun to open warehouses in individual states to improve delivery speeds. It has now become an unlikely supporter.

At present, shoppers are expected to fill in returns to pay state sales taxes but none do. The legislation will put that obligation on the retailer. Asos said it will add a function onto its site to allow it to add individual taxes on at the checkout stage. 

However, it said the process will have 'many complexities.' Not only do sales tax rates differ from state to state but rules can also vary in cities and state counties. That means UK firms could be faced with completing dozens of returns a month to prevent clashing with the US tax authorities. 

The rules will encompass all retailers will online sales of $1 million or more. Groups such as Ebay and Etsy say that should be increased to $10 million.

Amazon's Domain Claim Contested

Amazon's bid to register its name as a key domain name in a massive overhaul of internet addresses has been been hit by a major snag. The Brazilian government, arguably the real owner of the 'Amazon', doesn't like the idea. 

A successful attempt would mean Amazon would be able to use its name in place of .com and .co.uk at the end of domain names. It has applied to register the name, alongside scores of others, as a so-called Generic Top Level Domain that would mean it would rank alongside 22 existing categories (.com, .gov etc) and 250 country categories. 

That would mean it could use .amazon and others such as .shop, .song, .book and .kindle. But the Brazilian government is, perhaps understandably, appealing the attempt and has asked for Amazon to withdraw the registration. 

Each domain application costs around $185,000 and must be made to The Internet Corporation for Assigned Names and Numbers (Icann), a not-for-profit organisation organisation based in the US which plays a key role in governance of the internet.

Both Brazil and Peru say a private company should not be given the right to assign a name that relates to such an important geographic area. Brazil says it has the support of other members of the Amazon Co-operation treaty which include Bolivia, Colombia, Ecuador, Guyana, Suriname and Venezuela. 

'Allowing private companies to register geographic names as gTLDs to reinforce their brand strategy or to profit from the meaning of these names does not serve, in our view, the public interest,' the Brazilian government said in a statement.

Amazon's rival in the US Barnes & Noble has objected to Amazon's applications for .book and .author - although not .amazon. 

Icann appears to have acknowledged the complications that have arisen in its plan to widen the use of domain names. It has put the approval of disputed names on hold and also suggested that the holders of new names will be placed under greater restrictions that existing ones. 

Meanwhile, Argentina has lobbied against US outdoor retailer Patagonia's application for its name as a gTLD and China has complained over hotel chain Shangrila's application. 

However, The Guardian newspaper has pointed out that Shangri-la in Yunnan province was only named so in 2001 which was well after the establishment of the hotel chain. 

The first approved names should be in use by the end of the year. Disputed names will be further debated by Icann in July.  

Comment: US Online Tax Row Hits Britain

News of the political tax row over online shopping in the US has finally hit the UK.

Fast growing internet fashion site Asos has confirmed concerns we have raised on the site that the ripples would reach here sooner or later. It has said today it was already preparing for a change in the law by re-engineering its site to stay ahead of US tax laws.

Tomorrow the Senate is expected to pass a law that could ultimately force UK firms to collect taxes on behalf of US states. From the Senate, the legislation will pass to the US House of Representatives where it will be further debated later this year.

At present, state sales taxes on internet shopping are supposed to be declared and paid for by consumers on individual tax returns directly to the state in which they live. The Marketplace Fairness Act will shift the burden onto online retailers. If the obligation were made monthly then it would potentially require dozens of tax returns a month sent over to the US. 

Senior British e-commerce sources we have spoken to believe it could take some time to implement the tax proposals. They say the earlier the problem is dealt with the better.  

Asos has clearly concluded that, although the row is politically far from decided, it does not want to be caught out if legislation is passed though quickly. When this kind of thing has happened in the past, US law enforcement agencies generally don't give much quarter. See the changes to online gambling laws that came in overnight in 2006 and the arrests of UK-based executives that followed. 

Apparently, our sources say, some other large retailers in the UK with reasonably sized US customer bases are taking a more relaxed approach and have done very little about it. The issue has barely hit their radars, in fact. No fingers pointed but but they include a number of large high street names.

An Asos spokesman told The Mail on Sunday's business pages: ‘I can see this having many complexities. For smaller retailers the cost could be significant. There will also be a compliance burden that might mean a small company doing a tax return every month to fifty different US states.’

Asos is going to add a facility onto its US sites that will enable it to collect the tax if and when the change comes into force.

The paper says that other firms with sizable or growing US sales revenues are Marks & Spencer, John Lewis, Next, Burberry, Boden,  Net-A-Porter, Jack Wills and Ted Baker. 

The new rules will require any retailer with online sales in the US over $1 million (£642,508) to comply. That could mean businesses operating through marketplace sites like Amazon and Ebay. 

Each state charges different sales tax rates and US customers are used to seeing the addition on their receipts when they arrive at checkouts so it is not clear how the change would affect their shopping habits, the piece says. Some areas have a zero rating while New York, the highest, charges around 12 per cent. Cities and counties within states charge different taxes and different product also have different rates. 

To complicate matters further, rates on products often don't kick in straight away. New York does not charge tax on clothing spend of less than $55.

For Asos most of the expertise to deal with this will already be in the company while for smaller firms it will not. The burden on them will, relatively speaking, be significantly higher. 

The Marketplace Fairness Act is expected to face significant opposition from Republican anti-tax lobbies as it heads for the House of Representatives. But supporters include President Obama, Wal-Mart and that other retail giant Target. Amazon, as we have discussed elsewhere and for its own reasons, is also a supporter. 

Other lobby groups and firms such as Ebay and Etsy have argued the revenue threshold should be higher at $10 million. 

Either way, the sooner firms come up with solutions - even if its just to consolidate the issue in their plan for now - the more likely they are to deal with it when and it happens.

Food Store Iceland Tests Online

Frozen food chain Iceland has launched an online delivery service trial to be available at 25 stores from this week. 

It began last month in two stores and the system will be tested before being extended to as many as 650 stores.

The value retailer has more than 800 stores and already offers a delivery service for shoppers who do not want, or are unable, to carry their bags home with them.

The existing service was launched in 1997 and is free for orders over £25 and makes around 180,000 deliveries a week. The lower socio-demographic of many Iceland customers means they do not have a car and the delivery service is seen as an alternative is carrying bags home on the bus.

The initial online test has already exceeded expectations, the company said. Because some stores are larger than others the selection available to customers is tailored to the product range at individual outlets. 

The delivery service was originally extended to telephone and online shopping in 1999. But the online service was small and was later scrapped during a financial and operational reorganisation of the of Iceland business when founder Malcolm Walker returned in 2005. It was held back in part because so many of its shoppers did not have access to a computer and the launch was before the era of broadband internet provision. 

The existing delivery business serves 791 stores and uses 1,300 vans. The chain has also signed a five-year deal with Mercedes-Benz to replace its entire fleet of vans.

Iceland chairman and chief executive Malcolm Walker said: 'It was not a priority when I was faced with the challenge of turning around a near bankrupt company on my return to the business in 2005. Now the time is right to re-launch the service, building on our well-established and smoothly running home delivery infrastructure with an easy-to-use website that sets new standards for customer friendliness.'

Selfridges Online Heads Overseas

Luxury department store Selfridges will launch an international online business later this year.

Shoppers from outside the UK can only order from its site by phone at present. But from August the shop will begin to launch in 54 countries. The first will be in mainland Europe followed by the rest of the world, including China. 

The firm has been in talks with brands to overcome issues with cross border selling and exclusivity contracts with other retailers, it is understood.

The strategy has been organised by Selfridges multichannel director Simon Forster who arrived in December from high street department store chain Debenhams. His team's overhaul of the store's online offer includes offering a Click & Collect service to all four British stores. 

Click & Collect launched at the London store last month and will be introduced to the other stores in Birmingham, Manchester Exchange Square and Manchester Trafford Centre which is five miles outside the city,  from Wednesday. 

Shoppers will be able to make orders up to 4pm and collect the order as soon as their local store opens the following day. Customers will be given 30 minutes dedicated parking while they collect the order to allow time to try clothes on. The London store also offers same-day delivery service within the M25 for £16. 

It is also considering a plan to allow shoppers to pick up goods from staff at the store's entrance next year to avoid having to leave their cars.

Wal-Mart Goes Bespoke in Amazon Battle

US retail giant Wal-Mart said it is developing its own software to give it a competitive advantage in its bid to grow online.

It has also spoken of its ambition to keep a 'faster and faster' pace with the ever changing digitally aware customer.

Speaking at the Barclays Capital Consumer Discretionary Conference in New York, chief executive officer of its global e-commerce operation Neil Ashe said: 'We have made the strategic decision to in-source our technology around e-commerce. We can't do what we want and need to do with off-the-shelf solutions.'

Wal-Mart is preparing for an online battle with entrenched internet firms like Amazon in the US even though one of its executives said recently that online sales this year were only expected to be $9 billion. It doesn't disclose the figures as part of its normal financial releases so it is not clear what that figure compares to last year. But it compares to Amazon's revenues of $61.1 billion in 2012 which has more than tripled since 2007.

Ashe added: 'Our global technology platform empowers us to change, certainly faster than anyone else, and almost as fast as the customer,' according to US magazine web site Supermarket News.

Digital Boost To Book Market

Sales of books in the UK edged up 4 per cent last year after a surge in the sales of e-books. 

The Publishers Association said the market is now worth £3.3 billion. Printed books still account for £2.9 billion, a drop of just one per cent on the previous year. 

Digital sales of fiction and non fiction for the consumer market increased 134 per cent to £216 million. Total digital sales, including textbooks, increased 66 per cent to £411 million. 

Consumer titles had already surged 366 per cent in 2011 as more people bought Kindle and Kobo readers and tablet computers. 

Digital formats, which include ebooks, audiobook downloads and online subscriptions,  accounted for 12 per cent, rising from 8 per cent in 2011 and 5 per cent in 2010. 

Richard Mollet, chief executive of The Publishers Association, said publishing continued to be 'healthy and continues to grow.'

Experts believe, despite the rapid adoption of e-readers, books may be more resilient than the music market was to downloading.

Argos Pledges Online Revitalisation Plan

The owner of the Argos chain has pledged to revitalise the business in order to better compete with online rivals such as Tesco and Amazon. 

The board said the plan will make Argos into a 'digital retail leader' after it unveiled the first rise in sales at the chain for five years. Home Retail Group, which also owns home improvement chain Homebase, wants to add more own-brand product to the Argos website and attract a broader customer base.

Home Retail chief executive Duddy launched a £300 million investment programme last year and says the improvement plan will take three to five years. He wants to acquire more brands and make better use of existing ones such as homewares range Habitat.

Home Retail is struggling to improve its performance in the face of fierce competition. Profits have slipped and in the year to March 2 were only about a quarter of those reported five years ago. 

Argos was one of the first High Street retailers to build an online site in 2002. Yesterday it said multichannel sales accounted for 51 per cent of sales, more than half of revenues for the first time. It has also made inroads into the mobile market with new apps.  

The number of shoppers visiting Argos on mobile devices jumped 116% in the year to March, helped by the launch of new iPad app at the end of 2012. The retailer said orders from mobile phones and tablet computers now account for 10 per cent of sales.

Home Retail Group said its profit dropped for the fifth straight year as it planned to reinvigorate its Argos chain. Benchmark profit before tax across the group fell 10 per cent to £91 million mainly because of a poor performance at Homebase. Profit at Argos increased 6.5 per cent to £100 million on sales of £3.9 billion.

It said multichannel sales at Homebase, where profit halved to £11 million on declining sales of £1.4 billion, rose 16 per cent and now account for 5 per cent of sales.

However, some analysts believe Homebase's performance could worsen and that the five year plan for Argos may not be not quick enough to cope with the rapid changes in the UK retail market. 

Panmure Gordon analysts Philip Dorgan said: 'We think that Argos's turnaround will take too long and that Homebase is in danger of slipping into losses. We also believe that, as with many traditional retailers, Home Retail is making a virtue out of a necessity in that they are building a substantial store portfolio into an online model. Long-term we think this will fail.'

Overseas Online Sales Could Hit £28 Billion

International sales generated by online retailers will rise by £4 billion a year for the next seven years, according to a new study.

Reseach by OC&C Strategy Consultants and Google suggests overseas sales will hit £28 billion by 2020 from £4 billion last year.

The study says international sales will account for 40 per cent of total online sales at that point compared to 14 per cent in 2012. 

Western Europe could account for £9.8 billion, compared to £1.5 billion last year, with Eastern Europe rising from £400 million to £6.9 billion and Asia from £400 million to £4.5 billion. 

Sales in North America will rise from £2.7 billion to £8 billion, the biggest single market but rising at a slower rate because of online competition and the relative maturity of the market, the study suggests. 

The number of searches for British brands and retailers has risen by 46 per cent a year since 2010 and about half the traffic to British names is from overseas.

Google director Peter Fitzgerald said: 'The majority of searches from outside the UK are coming from Europe, followed by North America and Asia. It is driven by the increased popularity of British brands abroad. Retailers can use search data to identify pockets of demand and move quickly to meet those needs.'