Capgemini IMRG eRetail Sales Index: Lowest ever monthly growth caps turbulent year for online retail

After online retail defied the downturn on the high street to record +16% (YoY) growth in the first six months of the year, a series of lacklustre performances contributed to a lowly +8.4% (YoY) growth for the second half of 2018.

Figure 1 – YoY growth rates during 2018

Such was the impact of feel-good events like the Royal Wedding and FIFA World Cup, not to mention the glorious weather, that online retail sales across the whole of 2018 (+11.8% YoY) were in-fact still up on the start-of-the-year forecast of 9%.

However, the poor performance across H2 and December in particular, is evidence of low shopper confidence in the current climate. December’s growth rate of +3.6% (YoY) was by some distance the lowest seen across the whole of 2018, and continued a declining trend – falling below the final quarter (+6.8%), second half (+8.4%) and 12 month (+11.8%) averages respectively.

Figure 2 – Oct-Dec YoY performance since 2016

According to the index, online spending in December decreased -15% month-on-month (MoM) to November – a bigger decrease than the -11% MoM witnessed last year. Category results also echoed this poor performance, with gifts experiencing a -31.1% (YoY) decrease compared to last year, and electricals down by -21.7% (YoY); a record low for this product category. As a reflection of the continuing uncertainty, Capgemini and IMRG have forecast that online retail growth will fall to +9% YoY in 2019.

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, Capgemini: “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 undoubtedly be a focus of next year.”

-ENDS-

About the ‘IMRG Capgemini e-Retail Sales Index’

The IMRG Capgemini Index, which was started in April 2000, tracks ‘online sales’, which we define as ‘transactions completed fully, including payment, via interactive channels’ from any location, including in-store.

About IMRG

For over 20 years, IMRG (Interactive Media in Retail Group) has been the voice of e-retail in the UK. We are a membership community comprising businesses of all sizes – multichannel and pureplay, SME and multinational, and solution providers to industry. We support our members through a range of activities – including market tracking and insight, benchmarking and best practice sharing. Our indexes provide in-depth intelligence on online sales, mobile sales, delivery trends and over 40 additional KPIs. Our goal is to ensure our members have the information and resources they need to succeed in rapidly-evolving markets – both domestically and internationally. www.imrg.org

About Capgemini

A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of 200,000 team members in over 40 countries. The Group reported 2017 global revenues of EUR 12.8 billion.