‘Tough 2018 to come’ for UK online retail

A slowing growth rate in UK online retail sales is one of multiple indicators of a maturing market, according to the latest figures from the IMRG Capgemini e-Retail Sales Index.

In 2017, online retail sales were up 12.1 per cent year-on-year – compared with a 15.9 per cent year-on-year increase in 2016. The annual forecast for 2018 is a rise of 9 per cent - the first time e-commerce sales growth will have been in single digits.

According to the study, only the months of March and April in 2017 showed notably stronger growth than the previous year. The index's performance in 2016 was largely driven by strong sales growth through smartphones, but this slowed in 2017.

Sales growth through smartphones averaged 77 per cent each month from July to December 2016. In the same period in 2017 it fell to 50 per cent. Growth through tablets has also stalled (up 0.7 per cent in 2017), and 2018 growth is expected to slow down further for all devices.

December’s year-on-year growth was 9.1 per cent – representing the year’s lowest growth and reflecting the changing shape of Christmas shopping as sales are pulled forward into October and November by Black Friday. Further analysis shows that this trend has been ongoing since 2014 – coinciding with when Black Friday was adopted widely by UK retailers and consumers.

Justin Opie, managing director at IMRG, said: “A decline in the rate of online sales growth in 2017 was forecast, though it turned out to be sharper than expected. The macro economic factors – rising inflation, low wage growth, rise in the interest rate etc – are likely to have been influential and the first half of 2018 may be challenging too.

“That said, 2018 does look set to be a transformational year for retail – with an increasing use of AI services anticipated plus the rise of ‘browserless commerce’ (through devices such as voice assistants). It may be that we see shopper behaviour shift significantly over the coming period.”

Bhavesh Unadkhat, principal consultant in retail customer engagement at Capgemini, added: “2018 will be ultra competitive with continued uncertainty, retailers will therefore need to be focused on their plans to both survive and grow. One opportunity for growth and differentiation will come from emerging technology as we saw as a focus in 2017 – voice and social commerce, connected devices and AI all drove interest and investment and will continue to do so – the big challenge will remain as how to drive value and industrialising this capability.”

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