Online sales are expected to more than double to £21.3bn by the end of 2011, making up for the expected decline in trade in high street stores.
By James Hall, Retail Editor | Published: 7:09AM BST 24 Jun 2009

A major new survey by PayPal, the online payment system, predicts that sales in physical stores will plummet by up to £8.3bn by the end of 2011. However, online sales are expected to rise from just under £9bn to £21.3bn, resulting in modest growth for overall sales.

Carl Scheible, managing director of PayPal UK, argued that the report shows that the value of online retail "can no longer be dismissed as a sideshow". Mr Scheible said that the growth of internet shopping will prop up a declining general retail sector.

"Online's phenomenal growth is not only forecast to deliver sales of as much as £21.3bn by 2011, but a £12.3bn increase will also ensure that the entire UK retail sector is growing again by the end of 2011," he said.

"The recession has been tough for many UK retailers as they deal with the slowdown and its knock-on impact on consumer spending. Of course, many of the major high-street brands have actually enjoyed the online boom, despite facing challenges in their own stores. The improvements in online shopping will continue to drive consumers until they are spending £1 in every £14 online," said Mr Scheible.

The report, which was carried out by Experian, forecasts that from 2008 to 2011 high street sales will fall by up to 1.4pc.

Nearly 9m adults shop online at least once a week, the report shows.

Mr Scheible said: "In our experience the retail winners from this recession will be those that work hard to meet expectations. If customers have come to expect fantastic service on the high street, retailers must make sure they aren't disappointed if they head online. Customers want good value, simplicity and security when they decide where to spend their money online."

According to the report, which was based on interviews with 1,000 adults, 24% of UK adults now believe that online shopping will become the norm and that the high street will eventually die out. Over half of consumers polled believe that high-street retailers could significantly improve their websites and sales processes to "enhance the customer experience".