Online retail will grab a third of UK consumer spending by 2010, analysts claim.

The impact is that inflation remains low, as Internet shopping helps consumers track down and secure the best shopping deals. This serves to increase price-driven competition among shoppers.

Interactive Media In Retail Group (IMRG) CEO James Roper told Reuters: "The Internet is making retail highly competitive because it gives the consumer so much power."

Online spending is growing six times faster than the high street, and is estimated to reach £3.5 billion this Christmas.