September to remember for UK online retailers but spectre of inflation looms large

September to remember for UK online retailers but spectre of inflation looms large

UK online retail sales were up 14% year-on-year in September, according to the IMRG Capgemini e-Retail Sales Index. But whilst this was the third strongest growth rate so far in 2017, there were signs of macroeconomic pressures influencing shopper behaviour.

The electricals sector suffered its first negative year-on-year growth (-5.6%) since IMRG started tracking it in 2003. It also marked the sixth consecutive month of negative growth for this sector, which may be experiencing the impact of inflation more notably than some other sectors due to the relatively high cost of products. Several electrical manufacturers have already signalled that they have had to raise prices in response to inflation, perhaps leading shoppers to wait until Black Friday to make more expensive purchases.

Clothing, on the other hand, saw its highest September year-on-year growth in four years. September data from the ONS showed that clothing prices rose less sharply than the same time last year, which may have helped boost shopper confidence in that sector.

Bhavesh Unadkat, Principal Consultant in Retail Customer Engagement Design, Capgemini, says: “While 14% seems high, it hides the impact of inflation. When you look at how much faster online is growing than multi-channel it implies that people are currently more price sensitive, comparing deals rather than buying directly through retail. Couple this with September’s cross sector spending habits, and it indicates a strong focus on essential purchases, with gifts slowing significantly and electricals continuing to decline. It could in fact be argued that electricals now serve as an indicator of consumer confidence, especially when you pit the sector’s performance against the previous year’s across the last six months.”

Justin Opie, Managing Director, IMRG comments: “There are several notable differences between the online sales performance of online-only and multi-channel retailers. While the online-only retailers are enjoying far higher conversion and sales growth currently, the average spend on multi-channel retail sites is much higher. It’s possible that the online-only retailers are benefiting from the lingering perception that the best deals are available online, so as pressure on their available spend increases, shoppers look to the ‘pure’ online brands over the high street alternatives. Conversion on multi-channel retail sites may also be suppressed by use of store locators and a higher potential for abandoning a basket online, where they were carrying out research, only to complete the purchase in a conveniently-located store.”

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