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IREU Top500 The Customer Report: 2018

IREU Top500 The Customer Report: 2018

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Online retail sales up in November as retailers cut prices and customers took new approaches to buying

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Discounts and mobile shopping helped to drive online sales growth in November, according to two sets of figures out this week.

Official figures from the Office for National Statistics (ONS) suggest that that shoppers spent an average of £888.4m online each week last month, 12.7% more than they did at the same time last year. That's equivalent to 13.4% of the average £8.1bn spent each week on retail goods and services in November, adding up to a total £32.2bn. Overall, said the November Retail Sales bulletin, shoppers bought 5% more goods than they did in November 2014, and 1.7% more than they did in October 2015. But they spent only 1.4% more than they did both last year and last month.

Meanwhile, e-retail trade association the IMRG estimates that ecommerce sales rose by 40% in November, the highest one-month rise since its records began.

The ONS pointed to the role of discounting in higher sales across all channels in boosting pre-Christmas spending.

Melanie Richard, ONS head of retail sales, said: "A continued fall in prices as well as promotions in the run up to Christmas have helped to boost the amount shoppers bought in November, both on the high street and online, with the biggest increases coming from department stores and household goods retailers."

Department stores, it found, saw ecommerce sales rise by 24.4%, compared to the same time last year, to account for 12.7% of all sales in the sector, while household goods internet sales were up by 38.3% in November, accounting for 9.1% of all sales in that category. Online food sales grew by 11.3% in November, and accounted for 4.4% of all grocery sales, while textile, clothing and footwear stores reported online sales up by 18.2%, year-on-year, to account for 13.5% of all sales in the category.

Commenting on the rise of discounting, Hannau Maundrell, editor-in-chief at money.co.uk, said: "The Black Friday furore has conditioned consumers to expect sales and special offers throughout December. Shoppers have developed full price phobia; this is only exacerbated at Christmas as everyone aspires to give lavish gifts on a shoestring budget.

"Digital shoppers are savvier than ever; using the net to hunt for bargains, find voucher codes and sign up to newsletters to get discounts, only to unsubscribe a day later. Simply being the cheapest is a never-ending battle few companies can afford to win.

"Online retailers have been backed into a corner and many feel they’re left with little choice but to undercut their High Street rivals to retain custom. This is not sustainable. To win this war it’ll take more than cheap prices: wowing with brilliant customer service and tackling shoppers’ biggest concerns upfront is the way to convert one-time buyers to regulars."

Meanwhile, the IMRG cited the convenience of the smartphone for buying on the move. Its IMRG Capgemini eRetail Sales Index suggested that 32% of all ecommerce sales on Black Friday took place over the devices, with smartphone sales up by 97% since the same time last year. Tablets saw more modest growth, with purchases from the mobile devices growing by 12%, year-on-year.

“It is evident that the shift toward mobile devices continues, with smartphones accounting for an increasing share of mobile commerce sales," said Tina Spooner, chief information officer at IMRG . "In fact, smartphones have taken an additional 10% share over the past 12 months alone, accounting for almost a third of m-retail sales in November, up from 22% in the same month last year.”

The IMRG found that 35% of all ecommerce sales during the month fell in Black Friday week, which started on November 22. Sales from Cyber Monday, November 30, will be included in the index's December figures.

Online-only retailers, said the IMRG, saw their November sales grow by 24%, year-on-year, while multichannel retailers' sales were up by 4% over the same period.

Alex Smith-Bingham, head of digital, consumer products and retail at Capgemini , said: “It’s becoming clearer that Black Friday is the online retailer’s day, taking sales away from the High Street and out-competing their multichannel counterparts. The significant shift to smartphones shows that those with a mobile-first strategy across the customer journey are at a distinct advantage. The results in December will tell whether the success for online retailers is limited to the day or the two-week period.”

Electricals and gifts did particularly well over Black Friday week itself. Some 39% of all electricals sales and 40% of gift sales fell during the week. Electricals sales were 83% up on the previous month, but only 5% up on the previous year.

The early signs are that delivery networks held up better than in last year's retail tsunami, when overwhelming volumes of discounted items were bought over the course of Black Friday and the following days, according to the IMRG MetaPack UK Delivery Index. It found online retail delivery volumes were up by 40% between October and November, with on-time, first-time delivery coming in at 93%.

Andrew Starkey, head of e-logistics, IMRG, said: “A key part of our advice to retailers running discount campaigns this year was to extend them over longer periods to relieve the pressure on supply chains. It seems that many did bring forward their sales activity, which has so far helped industry to fulfil the huge volumes of orders efficiently – in spite of Black Friday becoming an even bigger event than last year. Of course delivery operations are still right in the middle of their peak period, but the signs so far are positive – no doubt also a reflection of the huge investment made by carriers in recent years in order to ensure peak can be managed effectively.”

Commenting on the ONS figures, Keith Richardson, managing director retail sector at Lloyds Bank Commercial Banking, said it was still too early to say whether it was really a success for retailers. Shoppers planned for Black Friday just as much as traders did, he said, saving the money to spend and buying online from home rather than on the high street.

"Looking ahead, these figures doesn’t bode well for the crucial Christmas period," he said. “Consumers haven’t had it so good since last time fuel prices dropped below £1-a-litre – which should be the recipe for a bumper year – but they have also learned to be more savvy since then. Shoppers show no sign of giving up their diet of discounts, and while volume of sales might increase, deflationary prices mean sales values may drop this Christmas.

“With retailers’ costs set to increase with the introduction of the living wage next year, they need customers to loosen the purse strings now.”
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