Online retail sales slumps to lowest ever growth rate

1873
online sales
// Online retail sales for the first half of the year increased by 5.4%, compared to 16.9% in 2018
// This marks the lowest ever growth rate for the year so far, according to the eRetail Sales Index
// First half growth for multichannel retailers was lower than online-only retailers: 5.2% vs 7.4%

A boost in June wasn’t enough to save online retail in the first half of 2019, with records showing that sales slumped to their lowest ever growth rate.

According to data from the IMRG Capgemini eRetail Sales Index, the first half of the year saw online sales growth of just 5.4 per cent year-on-year.

Comparatively, the same time period in 2018 saw growth of 16.9 per cent year-on-year, with consumer spending buoyed by events like the royal wedding, World Cup and the spring heatwave.

The index indicates that this slowdown was reflected across the sectors, with all but three recording reduced but still positive increases.

Health & beauty, home & garden, and clothing saw the strongest growth at 13 per cent, 9.3 per cent and 7.3 per cent respectively.

Elsewhere, the sectors which fared worst were electricals, gifts and lingerie, declining 22.7 per cent, 22.8 per cent and 8.9 per cent respectively.

These three sectors also experienced a continuous decline in sales over the past six months.

Capgemini principal consultant Bhavesh Unadkat said the figures came about after a gloomy start to the year following the drop off in performance in the second of half of last year.

He also attributed it to consumer confidence dwindling to “all-time lows”.

“During the first half, consumer confidence settled in negative territory, on average 5.5 points below 2018 and growth was lowest recorded 5.4 per cent, a third of last year,” he said.

“In addition to this, consumers are cutting back on non-essential according to a Barclaycard survey, and sectors such as electricals are taking a hit online.

“If this year continues to mirror performance of last year, we can hope for a stronger second half.

“However, with Brexit happening just before peak period and still uncertainty around what it will bring, we cannot know whether the index will recover or growth under 10 per cent will be the new norm, at least for this year.

“Caution and volatility within the market remain for the foreseeable.”

IMRG insight director Andy Mulcahy highlighted the increasing trend of online and physical retail mixing together rather than being separate entities.

He said multichannel retailers were currently experiencing lower growth than the online-only retailers, at 5.2 per cent compared to 7.4 per cent.

“What we are now seeing is that they are not separate at all, but in fact deeply interconnected – hence growth in the first half of 2019 was the lowest yet recorded,” he said.

“With so much media coverage of well-known retailers announcing profit warnings and store closures, customer confidence in shopping with them is low.

“This forces them into heavy discounting to drive sales and their competitors get dragged into it too.

“It has now become so widespread that shoppers are used to the wide availability of discounts and many retailers – whether online-only or with a store portfolio – seem a bit stuck in it even before we reach the Black Friday peak.”

He added: “It may be that the old perception of getting better value online still persists, and that shoppers associate high street retailers with the highest chance of falling into administration, so they are having to work even harder than their online-only competitors to build sales.”

The eRetail Sales Index tracks the online sales performance of over 200 retailers with a combined annual spend of £28 billion.

Click here to sign up to Retail Gazette‘s free daily email newsletter