Internet Shopping: An OFT market study

In a little more than a decade, the internet has revolutionised the lives of millions of its users. Our study explores one aspect of this revolution: its growing use by businesses and individuals as a retail channel.In 1995, someone wanting to buy an old Betamax video recorder could spend weeks scouring specialist shops and markets, placing adverts in collectors’ magazines or calling individual dealers. If they wanted to buy a flight, they could visit or call their local travel agents and wait to receive the tickets in the post or collect them in person.If they wanted to buy a former hit song, they could travel to the nearest record shops and hunt for it, or order it and pick it up some time later. They could then drive to a local car boot sale, to trawl through the items on offer from other individuals, before driving home with some bargains.A decade later, without moving from their seat, the same person might find and buy the video recorder in minutes, possibly in another country. Within the same hour they could have compared flight prices and times from many providers, bought and already received their ‘electronic tickets’. They could then click on a music download site and be listening to their favourite song in the same time that it would have taken to get ready to go to the shops. Finally, they might take delivery of the bargain they bought at an online auction and leave some comments on the site, to let other shoppers know whether they were satisfied with the transaction.The scale and growth of internet shopping is impressive. In 2005, sales over the internet by UK non-financial businesses to households were over £21bn – a fourfold increase in only three years.1 But it also raises new questions about risks and shoppers’ confidence when buying at a distance, as well as the relevance and effectiveness of the laws protecting them, many of them developed before the recent growth ininternet shopping.As a public authority, whose role is to make markets work well for consumers, the Office of Fair Trading needs to consider these issues. This report helps to meet that need.