Despite online sales growth of 16% during the first half of 2018, the latter part of the year painted a different picture. During the second half, UK online sales growth fell to 8.4%, and growth in September was the lowest for that month since 2014. This was followed in December by growth dropping to an all-time low of 3.6% – the slowest monthly rate ever recorded by the Capgemini IMRG Eretail Sales Index in 18 years of tracking.
Macro-economic factors are undoubtedly having an impact. IMRG notes the dip in consumer confidence as a result of uncertainty around Brexit as well as prominent high street collapses.
Behind the headline slowdown figure in December there are mixed fortunes. The electricals category is dragging down online sales overall. Over the year, growth in the category fell into a negative 3% and during the Christmas trading week, sales grew just 2%, as a result of a lack of technology innovation and consumer confidence.
By comparison, clothing sales during Christmas week were up 11.8%. Over 2018 menswear and footwear performed particularly strongly: menswear sales grew 22% year on year, thanks to a tailored offer and growing consumer demand, while footwear rose 18%.
When Drapers asked analysts and retailers if the overall slowdown in growth indicates a levelling-out of online sales, most said this is not the case. Consumers are not necessarily moving away from online sales. Instead, the figures reflect the macro-economic situation, but also new consumer demands.
To some extent, the slowdown in ecommerce sales growth was to be expected. Online shopping is no longer in its infancy.
Sales gains are not easily made, however.
A great product is still at the core of successful retailers, but that alone is not enough.
Pureplay retailers have been the traditional beneficiaries of online sales growth in the past but in some instances are failing to deliver the customer experience now expected. The online catalogue approach that forms the foundation of the pureplay model is starting to look dated.
“Younger shoppers are often more sophisticated than the retailers trying to serve them. Searching through lots of product online is [not a great] customer experience,” says Daniel Bobroff, founder and CEO of creative technology business Coded Futures.
Improvements in personalisation could help to fulfil the promise.
IMRG’s Mulcahy notes that the introduction of better fit and personalisation technologies have been key to growth in the menswear category. Online retailer Thread, which offers styling tips and branded product for men, is a case in point. Sales were up 53% year on year in December, making the month its second largest for growth in 2018.
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Head of business development Terry Betts says growth in the last quarter was also driven by footwear: “We invested significantly in our footwear partners, identifying it as a huge opportunity based on data and it came through strong at +90% versus last year.” Throughout the final quarter of the year, Thread focused on improved content, upping its game around photography, style tips and styling shoots.
Improved profitability could come by improving the customer experience through recommendation engines and personalisation.
Physical retailers have raised their game when it comes to competing for online sales, with the vast differentials in price between digital and store sales diminishing.
Parsons believes some operators are successfully bringing their channel-agnostic approaches into stores.
But there are still further challenges for physical retailers if they are to meet consumer expectations.
Macro-economic factors had a clear impact on online and retail sales during the second half of 2018 as consumers reined in spending amid ongoing uncertainty. During the first half of the year, however, online sales were resistant and grew 16%, boosted by spring and summer events including the Royal Wedding and the World Cup. This suggests that, without the macro issues, online sales can still perform well. This should be a source of comfort to retailers.
Those benefiting most are retailers who are taking their personalisation strategies seriously and developing a digital customer experience across channels. IMRG reported that all menswear retailers it tracks are performing well. The category is proving something of a testing ground for new technologies around sizing and styling. Improved information for customers on a more basic level, such as clearer onsite information, is also helping to drive sales – an indication that the customer experience must have clarity.