OVER FIVE MILLION ADULTS PLAN TO INCREASE THEIR SPENDING THIS YEAR AS BRITAIN CREEPS OUT OF RECESSION

• 20% drop in the number of people expecting to cut back on spending this year compared to last
• Over 10 million people now shop online every week - up 1.6 million from 2009 - as ‘Broadband Bargains’ continue to dominate shopping habits

According to a major retail study released today, British consumer confidence is creeping back with twice as many UK shoppers expecting to increase their spending in the next six months as a year ago. The PayPal Online Retail Report 2010 reveals that although caution and the hunt for value drive our shopping behaviour, 10% of UK shoppers expect to increase their spending in the next six months, compared to just 5% at this time last year*. In addition, over six and a half million of us (14%) no longer expect to cut back our spending this year and 16% of respondents say they will trade up to buy better quality goods over the coming months.

The annual report, undertaken by Experian and the Future Foundation on behalf of PayPal, reveals that the nation’s shopping outlook falls into two distinct camps – young, child-free ‘creeping optimists’ and cautious families and retired people.

Who’s feeling optimistic?
Although the general mood is still cautious, 30% of 18-34 years olds admit to treating themselves more than they were six months ago compared to only 10% of over-65’s. Young singles or couples are 1.5 times more likely to be treating themselves more than they were six months ago than those with families – 30% compared to 20% - suggesting that any pick-up in the economy is likely to be spearheaded by the younger generation.

Men are slightly more optimistic than women – 54% compared to 48% saying they’ll do things like spend more or buy better quality goods in the next few months. Regionally, people in the South West of England are the least likely to buy higher quality items over the next six months, while those from the South East are the most likely to.

Table 1: Percentage of shoppers expecting to improve the quality of their purchases in the next 6 months – by region**
South East = 21%
West Midlands =19%
London =18%
North West = 18%
East Midlands/East Anglia = 16%
Scotland =14%
Yorkshire/ North East = 12%
South West = 7%

Online shopping on the up
According to the research, a fifth - or 10.2 million - of us now shop online at least once a week with an extra 1.6 million becoming regular weekly online shoppers in the last year. As many as 19.5 million shop online at least once a month, up 4.5 million since 2009*.

The internet has been an important driver behind the increased consumer optimism. Nearly nine in 10 (87%) online shoppers who have bought better quality items feel that price-saving tools, such as internet comparison and discount sites like PayPal Offers, have helped them get more value for money.

Carl Scheible, Managing Director of PayPal UK said: “A sense of creeping optimism is growing amongst UK shoppers, which can only boost Britain’s fragile economic recovery. But PayPal’s latest study points to a clear divide between young, child-free ‘creeping optimists’ and cautious families and retired people.

“The research also suggests we may see continued growth in online spending on clothes and essentials like groceries during 2010, as many shoppers continue to look for good deals in these areas in uncertain times.

“The other key trend is the explosion in sales of smartphones like the iPhone, as commentators predict we’ll buy more smartphones than personal computers by the end of 2011***. The latest mobiles are brilliant for comparing prices and bagging a bargain online wherever we are. The savvy shopper is firmly in the driving seat.”

Who’s spending and on what?
Since last polled by PayPal in 2009, shoppers have increased the amount they spend per head online on travel, groceries, furniture and homewares, clothing and small electrical appliances.

Table 2: Average six month spend per head online by category****
Year on Year difference from 2009 period (November 2008 - April 2009) to 2010 period (September 2009 - February 2010)

Travel + £21
Financial services - £16
Grocery, food & drink + £49
Major purchases (e.g. white goods, cars)- £34
Technology - £41
Furniture and homewares + £27
Clothing + £47
General entertainment - £1
Small electrical appliances+ £27

The amount by which the most frequent online shoppers have increased their spending since last year is even more apparent. In particular shoppers who buy online once a week or more have upped the amount they spend in six months on groceries and clothing by £118 and £110 respectively - more than double the amount the by which the average online shopper***** has increased their spending in these areas.

- ENDS –

For further media information please contact:
Rob Skinner, Head of PR, PayPal UK
020 8439 2067 or rskinner@paypal.com

Sophie Lilley / Caroline Macleod-Smith/ Lucy Banks - Lansons Communications
020 7566 9777 or paypal@lansons.com

Notes to Editors

* PayPal UK Online Retail Report 2010 compiled by Experian and The Future Foundation on behalf of PayPal, March 2010. Working on behalf of the Future Foundation, Research Now conducted online research among a nationally representative sample of 1,500 consumers over 18 years old in the UK (1,373 of those surveyed were online shoppers who had bought a product or service online in the last six months). The research was carried out during late February 2010 and complies with all MRS guidelines: www.mrs.org.uk.

The research built on – and has been compared in this release with - an initial wave of online research undertaken by Research Now among a nationally representative sample of 1,000 consumers over 18 years old in the UK, in early April 2009.

** Shoppers in Northern Ireland and Wales were also surveyed but the sample size is too small to be a statistically robust reflection of all Northern Irish or Welsh shoppers’ habits.

*** According to research by RBC analyst Mike Abramsky September 2009

****Calculated from shoppers’ own estimates of their spend in each online category over previous six months

*****Average online shopper is someone who has shopped online in the last six months

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Published on: 12:01AM on 29th April 2010