Online retailing is showing signs of becoming a maturing market with predictions for a tough 2018 ahead. IMRG reports on the figures.
UK online retail sales were up 12.1% on average year-on-year (YoY) in 2017, according to the latest figures from the IMRG Capgemini e-Retail Sales Index. Compared to 2016’s YoY average of 15.9%, and roughly 2% lower than the Index’s 2017 forecast of 14%, the fall in annual growth is one of multiple indicators of a maturing market. Indeed, across the twelve months of 2017 only March and April showed notably stronger YoY growth than the previous year.
The Index performance in 2016 was largely driven by strong sales growth through smartphones, but this slowed in 2017. In the second half of 2015, sales growth through smartphones averaged 102% each month. In the same period in 2017 it halved to 50%. Growth through tablets has also stalled (up 0.7% in 2017), and 2018’s growth is expected to slow down further for all devices.
This is actually consistent with a 3-year-bounce pattern of growth identified in the Index, with peaks starting in 2010 and repeating in 2013 and 2016. 2010’s high growth rate can be attributed to a host of factors (including improved website load speeds, user experiences, and connectivity), 2013 was when tablets started to account for a significant share of online retail, and 2016 was driven by the proliferation of shopping via smartphones. Should 2018 follow this pattern we can anticipate a new stimulus to be entering or proliferating the market during 2019.
Justin Opie, Managing Director, IMRG comments: “A decline in the rate of online sales growth in 2017 was forecast, though it turned out to be sharper than expected. The macro economic factors – rising inflation, low wage growth, rise in the interest rate etc – are likely to have been influential and the first half of 2018 may be challenging too; discounting in the lead-up to Black Friday started deep into October in 2017 and have been widely available ever since. It may be that retailers will now find themselves caught in a cycle of discounting, which also happened in 2011 and 2015 and will probably extend long after the January sales, as the trading climate is tough at the moment. That said, 2018 does look set to be a transformational year for retail – with an increasing use of AI services anticipated plus the rise of ‘browserless commerce’ (through devices such as voice assistants). It may be that we see shopper behaviour shift significantly over the coming period.”
Turning to the monthly view, December’s YoY growth was 9.1% – representing the year’s lowest YoY growth and reflecting the changing shape of Christmas shopping as sales are pulled forward into October and November by Black Friday. Further analysis shows that this trend has been ongoing since 2014 – coinciding with when Black Friday was adopted widely by UK retailers and consumers.
Christmas 2017 is over, the returns are back and it’s time to tot up the numbers. How did you do? For some it was another mobile Christmas. The Yoox Net-A-Porter Group , for example, reported “outstanding results” as 96% of its sales on Cyber Monday took place on mobile. In fact, more than half of the luxury fashion group’s sales in 2017 were made on mobile devices, thanks in part to the Net-A-Porter app featuring high levels of engagement with customers.
While for others, the trading quarter was more challenging. Marks & Spencer reported an overall fall in sales. The retailer saw revenue growth from both in-store and online during the weeks leading up to Christmas but an “unseasonal” October meant revenues were down and there was more stock in the December sale. At House of Fraser , sales fell both on and offline over the six weeks to December 23, while Mothercare reported falling online and store sales over the Christmas period in what it said was a reflection of ongoing changes in consumer behaviour.
Chloe Rigby and Paul Skeldon, the Editors of InternetRetailing’s online publications, have been reporting on individual retailer’s Christmas trading figures as they come in. You can see the full details on www.internetretailing.net.