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Online sales continue to slow, but may be about to bottom out, studies show

Online retail sales continue to fall across November, but that fall is slowing – and Black Friday could yet see it reverse.

According to two separate sets of data, online sales growth dropped between 1.2 and 2.7% year-on-year in November. However, with Black Friday promotions starting earlier than ever, this could yet be reversed believe analysts.

IMRG CapGemini paints the more sober picture, suggesting that online sales growth remained negative at -2.7% YoY, for the first week of November. The Average Basket Value (ABV) also saw a decline from £140 to £135, confirming that the current economic climate is making consumers cost-conscious and careful about how much they are spending this year.

At a category level, however, beauty (+6.9%) and home & garden (+5.8%) saw a positive impact from a number of large retailers in those categories bringing their sales forward. Whilst electricals were down -9.4% despite many prominent retailers bringing their campaigns forward to promote the world cup, suggesting that an uptick in TV sales hasn’t compensated for the reductions seen elsewhere.

IMRG has also found that The first half of November shows retailers have significantly accelerated their Black Friday sales campaigns compared to previous years. Friday’s revealed that there has been a 78% increase Year-on-Year (YoY) for early activations, during the first two weeks of November, compared to the same period in 2021. That’s according to a tracker of 305 retailers

According to NielsenIQ data, online sales share may have reached a turning point as the decline has slowed to just -1.2% compared to -7.8% over the last 12 weeks. Online share is now stable at 11.4% share of FMCG sales and increased from an 18-month low of 10.9% in October. It now compares favourably to a 12.2% share this time last year. 

Mike Watkins, NielsenIQ’s UK Head of Retailer and Business Insight, said: “There is some better news for retailers and suppliers as shoppers claim they will start to buy some items early for Christmas. Our recent consumer survey shows that 30% of shoppers will have started their Christmas shopping this year before mid-October compared to 18% last year. 27% also say they will buy Christmas gifts when they see them in store which suggests a ‘spreading the cost of Christmas’ mindset is ever more important this year as budgets are stretched2.”

Watkins continues: “NielsenIQ is anticipating £34bn will be spent at the Grocery Multiples in the 12 weeks to 31.12.22 which is a growth of c4% compared to last year when there was weak post pandemic comparatives and no real industry growth. The difference this year is that, due to inflation, we expect volumes to be down c4% with shoppers buying less and more carefully this Christmas. With the cost of grocery shopping still rising, this is motivating shoppers to shop and buy differently. With all of the big four supermarkets either giving extra price reductions or adding weekly vouchers to their loyalty schemes, this may prove the catalyst to help grow sales this Christmas.”

Andy Mulcahy, Strategy and Insight Director at IMRG adds: “A substantial increase in the number of retailers, particularly large ones, with a Black Friday campaign live in the first week of November still didn’t push overall growth positive (it was -2.7% YoY). The categories with the highest number of early participants were home & garden, health & beauty, electronics and clothing. Home and beauty seem to have benefited the most, but electronics, where retailers focused heavily on TVs for watching the World Cup, was still down -9.4%, against -14% for the same week in 2021, so that feels like a disappointing response from shoppers.”

Simon Binge, Commerce Senior Manager, Customer Transformation at Capgemini concludes: “As predicted, UK retailers are beginning their Black Friday campaigns earlier than ever before in an attempt to stimulate demand. What is more surprising is the number of retailers who have launched their campaigns early – more than double each day from 2nd November compared to the same days in 2021 – but also the relative lack of activity from shoppers. Despite a huge amount of activity from retailers sales for the first week of November still trail last year at -2.7% YOY.  These early results are likely to be causing retailers to review their promotional plans for the Black Friday weekend, opting for deeper discounts and more attractive promotions, with the goal of winning the greatest share possible of an ever-shrinking wallet.”

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