October represented the nineteenth consecutive month of decline in online retail with sales down 3.4% year-on-year, according to the latest IMRG Capgemini Online Retail Index.
Month-on-month figures recorded a positive 11.7% uptick from September, suggesting current demand trends in the lead up to the seasonal period are in line with previous years – which sounds like good news as the sector enters the Black Friday month. However, after weak growth of sales throughout the summer, year-on-year figures for November are expected to remain negative.
On a positive note, growth in traffic to online retail sites was up 2.1% year-on-year in October, indicating interest in shopping is still there. A noticeable challenge for retailers is that online visitors are not converting into customers at the same rate of previous years, with the conversion rate consistently around 20% lower than that recorded across 2021.
Historically, the transition from summer into autumn tends to increase consumer spend as people begin to prepare early for Christmas. As a result, every category in October, with the exception of garden, saw positive month-on-month growth. Looking at a year-on-year
perspective, furniture was the standout category, up 2.9%, although this uptick was slower across premium brands indicating a more cost-conscious consumer spend. Meanwhile, clothing, which has seen positive sales for most of the year, experienced flat growth last month. Health and beauty (-7.2%), electricals (-7.6%) and home and garden (-5.1%) were among the most noticeable year-on-year declines.
Andy Mulcahy, Strategy and Insight Director at IMRG, said: “The gifts category gives us an indication of the challenging trading environment at the moment; it is experiencing declines of –20% and more in some weeks; this comes on top of declines of -30% for the same weeks in 2021. Shoppers may really tighten their spend in areas such as gifts, which isn’t great news for Christmas demand.
“Furthermore, the timing of the chancellor’s autumn statement, currently scheduled for the Thursday before the start of Black Friday ‘week’, and where many expect the announcement of tax rises, it seems likely that shopper confidence will be dented further at the worst possible time for retailers.”
Simon Binge, Commerce Senior Manager, Customer Transformation at Capgemini, added: “Even in categories that are bucking the trend for October, like Furniture, we can see clear evidence that the macro-economic environment is having an impact on consumer behaviour.
“Whilst Furniture was up 2.9% year-on-year, we can see that this growth is being driven by budget (+7.8%) and mid-market (+9.8%) retail categories, whereas the premium category is down a rather scary 42.8%. The trend of trading-down can also be seen across home & garden, gifts, and clothing where the budget & mid-market categories are outperforming their premium counterparts.”
NAM Implications:
- People are strapped for cash…
- ..and preoccupied with domestic worries…
- …on top of job uncertainty.
- This has got to filter down to online behaviour…
- And prioritising (like focusing on food & drink)
- Winning at online…
- …means platform excellence.
- And within that, having enough relative competitive appeal to grow at the expense of rivals, every time.
