Online retail growth slumps to lowest ever level in December
Online retail sales growth slumped to its lowest ever level in December capping a turbulent year for physical and online retail in the UK.
According to the Capgemini IMRG eRetail Sales Index, UK online retail sales growth hit an all-time low of just +3.6% year-on-year (YoY) in December, as the industry experienced a tough Christmas trading period to end a challenging second half of the year.
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.
The year's feel-good events like the Royal Wedding and FIFA World Cup, as well as the long, hot summer, meant 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%. But the sharp downturn in growth in the second half was evidence of low consumer confidence, Capgemini and IMRG said.
December’s growth rate of +3.6% (YoY) was by some distance the lowest seen across the whole of 2018 (see graph below), and continued a declining trend – falling below the final quarter (+6.8%), second half (+8.4%) and 12 month (+11.8%) averages respectively.
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. As a reflection of the continuing uncertainty, Capgemini and IMRG have forecast that online retail growth will fall to +9% YoY in 2019.
October to November performance 2016-2018
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.”
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