Executive Summary

Since its origins as a means of extending the reach of retailers to customers in distant locations, or to those unable to access credit easily, home shopping has become a significant sector of the UK retail industry. It represents a shifting point-of-sale in UK retailing, as a growing number of retailers adopt this method of selling. Together, the falling price of phone calls, near universal access to television (TV), widespread use of credit cards and, increasingly, the Internet (which already has in excess of 40 million retail outlets in cyberspace), have opened up the market to retailers and customers.

Between 1992 and 1997, sales increased by 42.9%, from £5.6bn to £8bn. However, while this growth reflects a greater trend towards home shopping generally, it hides the fact that the long-term market leaders are losing share. The traditional catalogue companies face increasing competition from the newer and highly targeted niche catalogues; from US and European catalogue operations establishing trading units in the UK; and from the major grocery multiples and large mixed retailers now offering home shopping services.

At the same time, their traditional strengths are being weakened by changing consumer habits and retail trends. In particular, agents are becoming hard to find, while the interest-free credit facility is no longer so attractive. The sector now has to compete with widespread availability of interest-free credit on the High Street, as well as credit cards, store cards and consumer loans.

As greater emphasis is placed on strategic database marketing and customer support services, the major home shopping companies have invested heavily in call centre technology and improving delivery times, to compete with smaller operations. Advances in database marketing and direct marketing have meant that specific client groups can be targeted in more detail than ever before, while the broad range of media outlets provides additional platforms for off-the-page and insert promotions.

Between 1998 and 2002, Key Note forecasts that the market for home shopping will grow by 48.9% to £13.1bn. Much of this growth will come from direct marketing, which is a sector of major expansion. However, the arrival of a growing number of niche catalogues, as well as the growing acceptance of the Internet and TV shopping, will boost revenues.

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