Internet shopping will grow five-fold to make up one third of British consumer spending by 2010, according to analysts, but its impact on inflation is already catching the eye of policymakers.
The Bank of England has been puzzled why inflation is so low - it fell to just 1.1 per cent in September - given soaring petrol prices, record low unemployment and the longest period of uninterrupted economic growth in 200 years.
One reason for the low figure is that the prices of many goods like televisions, computers and clothes just keep falling. An e-commerce boom can explain part of it, as shoppers browse the net to find deals.
"It's a combined effect but the internet has played a role in increasing price transparency," Verdict Research senior analyst Nick Gladding said.
That has increased competition, forcing merchants to cut their prices which is good news for consumers but squeezes retailers' profit margins. The danger is that consumers start expecting prices to keep going down and so perpetually put off purchases waiting for an even better deal.
The Bank of England is charged with keeping inflation at two per cent - neither above nor below. There have been some signs that consumer spending is slowing but recent surveys show Britons are still willing to spend if the price is right.
"The internet is making retail highly competitive because it gives the consumer so much power," researchers Interactive Media In Retail Group (IMRG) chief executive James Roper said.
Cyberspace spending is expanding six times faster than that on the high street and Mr Roper estimates £3.5 billion will pass through the web this Christmas as more and more Britons look to their computer screens for bargains.
According to some estimates, e-commerce will dominate about a third of consumer spending, minus financial services, within the next six years. It currently contributes only six per cent.
"More people buy online or at least do their browsing there," said marketing executive Natasha Burton at Footfall, a market research company which follows the retail sector.
And they should. Comparison sites like Kelkoo.co.uk show items selling for surprisingly varied prices. One widescreen television costs £800 at a high street store's website but is £250 cheaper elsewhere.
Economists say the Band of England is sure to be looking at the Internet phenomenon to figure out why it keeps underestimating inflation as it prepares new forecasts for its quarterly Inflation Report this week.
"It's clearly something that the Bank will be grappling with at a time when inflation is well below target," Lehman Brothers UK economist Alan Castle said.
"The proportion of retail spending through the internet is still pretty low but it's been growing quickly and it's something policymakers are going to look at when they try to fathom what is going on," he said.
Monetary Policy Committee member Richard Lambert identified a number of factors in an attempt to explain why inflation was so low, noting that the Web was clearly playing some part.