Growth In Online Retail Market Remains Solid But Sales Through Smartphones Slowing

UK online retail sales were up 15% year-on-year (YoY) in February, according to the latest figures from the IMRG Capgemini e-Retail Sales Index, building on solid growth in February 2016 (+16%). For the second month running, the average basket value was at a seven-year high for that month of the year.

While on the surface this represents a strong month for online retail sales growth, there were some signs that sustaining this rate of growth throughout the whole year may be a challenge. One of the main drivers for online retail in recent years has been the growth of sales made through smartphone devices. For the past three months, however, the rate of growth through these devices has roughly halved year-on-year — in February 2016 it was +96% YoY, but in February 2017 it was just +57%.

Tablet growth remains low (+3.5%) and, with smartphones taking a greater share of sales through mobile devices, a sustained slowdown in sales growth through this channel will come to impact upon growth rates for online retail overall.

However, this slowdown in growth through mobile devices (smartphones and tablets) is specific to online-only retailers. For multichannel retailers, which have both an online and in-store offering, growth in sales made on mobile devices was up slightly year-on-year, while the average basket value of online retail sales in general rose by nearly £20.

Across sectors, sales for electricals were up +1.5%. While low, it is at least in positive territory following two months of negative growth. The average basket value was down £8 year-on-year, however.

Bhavesh Unadkat, Principal Consultant in Retail Customer Engagement Design at Capgemini, commented: “It was positive to see a solid growth rate for online retail in February 2017, building on a strong February 2016 growth rate of 16%. However, there was a slight dip in the growth rate this month, and that could be attributed to a knock in consumer confidence triggered by higher prices. It is perhaps no coincidence that the Index’s growth rate slumped slightly in the face of a higher inflation rate which was over 1.5% in January 2017 compared with 0.3% in January 2016.

“Although there are some warning signs for the retail industry — with sales made on smartphones falling month-on-month, for example — these are trends we’ve seen echoed in previous years. Traditionally January and February are slower months for purchases made on smartphones, and e-retail sales in general.”

Justin Opie, managing director at IMRG, added: “It’s encouraging to see the second month of seven-year highs for average basket values in a row. When it comes to smartphones though, the slowdown in sales growth does appear to be fairly dramatic. That said, rates of smartphone growth over the past two years have been very high, and that couldn’t continue indefinitely. The slowdown is specific to the online-only retailers — multichannel retailers are performing better than they have been through mobile, with greatly increased average basket values.

“So it remains positive, but perhaps with a cloud or two on the horizon. Smartphones have been the driver of mobile growth, and the slowdown could come to impact growth. And, of course, the ever-present uncertainty of Brexit looms large in 2017, with inflation rising and Article 50 being triggered imminently.”