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PEAK 2021 No signs of early Christmas spend as online sales continue to underperform in October, but spending could see last minute splurge

Signs of an early Christmas fail to materialise

Despite expectations that an early start to festive spend might herald a return to growth in October, online retail sales have continued to remain low, falling by -11.2% year-on-year (YoY). 

According to the latest IMRG Capgemini Online Retail Index, which tracks the online sales performance of over 200 retailers, while the month-on-month (MoM) surge of +11.2% proved the highest since the high streets reopened in April, this performance falls in line with pre-pandemic patterns for this time of year.

Last month’s slowdown in online sales was once again kicked off by a poor first week, down -12.5% compared to only -0.9% during the last week. While the average basket value (ABV) remains high at £131 –  although down from its August peak of £149 –  the conversion rate has fallen further, from +2.9% in Oct ober2021 verses +4.1% in October 2020, suggesting ongoing issues with stock levels, due to the pressure on the supply chain.

At a category level, beers, wines and spirits retailers are still seeing positive growth, but only just – up +2.2% compared to last month’s figures of +18.6%. The only other category to record growth was clothing – up +7.5%. Elsewhere, for only the second time since December 2019, garden sales have declined (-7.5%), while health and beauty remains the worst hit category at -23.3% growth.

Lucy Gibbs, managing consultant – Retail Lead for Analytics & AI, Capgemini, says: “October online spending was more subdued than expected this year.  Stock shortages and supply chain disruptions gave speculation that customers might start shopping earlier than usual, however this may also be having a negative effect; Conversion is down across the board compared to the last two years 2.9% compared to 4.1% in 2020, with stock outs and lack of stock depth contributing to customers leaving the funnel.”

She adds: “Consumer confidence has also dropped for a third month in a row as financial concerns build due to increasing inflation and interest rates and climbing covid rates, providing a cautious backdrop ahead of the peak season this year.  Campaigns for black Friday are ready and waiting, however will these be enough to draw the share of wallet this season?”

Andy Mulcahy, strategy and insight director, IMRG says: “The potential for Christmas shopping to get underway early this year did not really materialise in October, but it is evident that retailers are certainly trying to get it moving in early November. Of the 317 retailers IMRG is tracking every day, 25 had their Black Friday campaigns live on Wednesday 3rd November versus only 14 on the same day in 2021. In terms of sales performance, it seems to be a mix at the moment, and this may be what characterises peak trading as some are better positioned with their stock levels than others. A poll IMRG ran of 50 retailers on 4th November found that half were seeing activity on their sites ‘below expectation’, while it was ‘above expectation’ for around a quarter. There could end up being quite a sharp divide between who does well and who does not this festive period.”

Better things still to come?

Separate research from Wunderman Thompson Commerce suggests that things may yet pick up. 

Its Peak 2021 Report, out today, predicts that Black Friday spending is set to increase by 15% from 2020 to well over £6bn.

The report, which researched over 6000 consumers in the UK, US and China, found that online shopping will skyrocket in 2021, with 70% of Black Friday shoppers indicating that they would increase their spend online vs 29% who said they would increase their spend in-store.

Wunderman isn’t alone. The Shopping for Christmas 2021 report, also forecasts a merry Christmas for retailers, as it predicts sales will exceed pre-pandemic levels for the first time in two years. 

In a promising sign of recovery for the retail industry, sales are expected to exceed the £83.13bn made during Christmas 2019 by 1.9%, as physical stores are all expected to remain open throughout the entire festive period, its data suggests.

On average, consumers are expected to spend £1,275 per head on preparations for Christmas this year, £76 more than in 2020. However, Londoners (£1,745), those in the South East (£1,468) and East of England (£1,341) are all forecast to outspend the national average as they get ready for a restriction-free Christmas. 

After last year’s ‘cancelled Christmas’, shoppers in every region of the UK are preparing to spend more on Christmas festivities than last year. London and the South East are the regions predicted to spend the most this Christmas, with shoppers in London forecast to spend a whopping £15.6bn in total and those in the South East closely following behind with £13.4bn. 

Retailers in the North West, West Midlands and Scotland are poised for the biggest year-on-year profit increases, as those living in the North West are forecast to spend 10.5% more than they did in 2020, whilst those in the West Midlands and Scotland are set to increase spend by 9.5%, well above the national average increase of 6.3%.

Angus Drummond, Senior Director, Commercial at VoucherCodes comments” “As the retail industry gets back on its feet recovering from huge challenges of the pandemic, our report’s prediction for this Christmas is the welcome news the industry has been waiting for. Last year’s store closures and lockdown regulations were devastating for many retailers, so it’s particularly encouraging to see that sales will not only recover from 2020, but will exceed pre-pandemic results. This Christmas could mark the start of the turning point for brands hopeful for a profitable 2022.”

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