The size and pace of online retail growth will outstrip the broader retail market in the next two years according to PayPal.

The payment provider expects online retail to grow by over 36% by the end of 2012 - a growth of around £8bn – compared to store retail which is predicted to grow by 1%, or £3.3 billion.

The rate of growth of online retail is also expected to increase by a rate of 22% throughout this year and 18% in 2011. In contrast, overall retail is only predicted to grow at a rate of 0.4% in 2010 and 1.6% in 2011.

This is due to consumers’ view that online shopping saves both money and time. “Shoppers turn to the internet when they are trying to be thrifty. Two thirds of online shoppers are now convinced their money goes further online,” said Carl Scheible, managing director of PayPal UK. He added: “The growth of online shopping is not just about saving money, it’s also about saving time.”

PayPal has also predicted that if the economic downturn continues, online retail will grow even more significantly. An optimistic forecast shows online retail sales growing by 56% from 2010 to 2012, meaning one in every eight pounds would be spent online.

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