UK retailers saw lacklustre growth in online sales during December, rounding off a difficult second half to 2018.
The Capgemini IMRG eRetail Sales Index recorded only a 3.6% growth figure for December, well below the year’s annual average of 11.8%.
Compared to November, online spending was down 15%. This was a greater fall than in 2017, when the equivalent figure was 11%.
Particular categories experienced worse results, with gifting down 31.1% and electricals down 21.7%.
According to the report, the figure dragged the growth figure for H2 down to 8.4% after events such as the Royal Wedding and weather pushed growth to 16% in H1.
The report’s authors blamed low shopper confidence and results and projected that as this uncertainty continued, online retail sales would grow only 9% in 2019.
However, sales over mobile in the month grew particularly fast, up 28% year on year.
Andy Mulcahy, strategy and insight director, IMRG: “The first half of 2018 was actually very strong for online retailers – it resisted and arguably benefitted from the tough climate that impacted trade for store retail.
“It is only the second half of the year where the suppressed confidence and spend, evident in so many other sectors, has spread to online retail; the macro-economic situation must be exerting pressure here, particularly with Brexit now entering its crunch period in Q1 2019.
“If there had not been so much uncertainty and shopper confidence had not been so negatively impacted toward the end of the year, it seems a reasonable bet that online retail sales growth could have been much stronger than 11.8% for 2018. If Brexit can be resolved so that a course, whatever that may be, is agreed and pursued, it may help to build shopper confidence again with online likely to be the main beneficiary from a retail perspective.
“However, if 2019 proves to be a year of continuing uncertainty, with repeated delays and political instability causing market disruption, it may prove to be a tough year for many businesses to navigate – as we found out in late 2018, online is not immune from that.”
Bhavesh Unadkat, principal consultant in retail customer engagement at Capgemini said: “A sharp drop in online retail spending in December brings the rollercoaster of a year to a close, with the industry unable to recover performance in the vital festive period following a disappointing November.
“There is a clear correlation between consumer confidence and consumer spending throughout the year. Conversion rates were actually high in December despite the poor performance, however the lower order value indicates that consumers were tightening the purse strings by taking advantage of promotions rather than purchasing more.
“This allowed discounters to take the share in the final month of the year. Retailers will need to think carefully on how to manage pricing strategies to protect share of the wallet in potentially quite uncertain times, and the evolution of the peak events will undoubtably be a focus of next year.”
Capgemini also released a report earlier this month which found that automation could help retailers meet customers’ last mile demands without sacrificing profitability.
