UK is Europe's biggest online retail market

The challenges facing traditional high street retailers from their Web-based rivals is underscored today in a report that shows the UK overtook Germany to become Europe's biggest online retail market last year.

A broadband price war, fuelled yesterday by BSkyB's launch of a free basic offer for its television customers, was behind the surge in cyber sales in the UK in 2005, according to the research group Mintel. Internet retail sales in the UK hit €9.79bn (£6.7bn) last year to Germany's €9.71bn, Mintel said. France was a distant third with online sales of €6.5bn.

British shoppers' willingness to shop online was illustrated by figures out from John Lewis Partnership that showed its website was now the group's second biggest "store" behind its Oxford Street flagship in terms of sales.

Internet retailers undercut bricks-and-mortar shops and often offer a wider range of goods, putting pressure on high street operators.

Next, the clothing group which already had a strong mail order business, and Argos, the catalogue shop chain, have proved more adept than most in doing business online.

"The business to consumer e-commerce sector has come of age and is gaining consumer acceptance as a 'normal' retail sales channel," Neil Mason, a senior retail analyst at Mintel, said. He predicted "physical shops" would fight back by improving shopping experiences and investing in more staff training.

Mintel said European internet retail sales surged 51 per cent in 2005 to €40.2bn compared with 2004, yet online shopping is still just 2 per cent of the total retail market. It expects the market will grow by 186 per cent between 2005 and 2010, when sales are tipped to reach €115bn.