Online retail sales were up 12.1% on average year-on-year (YoY) in 2017, according to the latest figures from the IMRG Capgemini e-Retail Sales Index. Compared to 2016’s YoY average of 15.9%, the fall in annual growth is one of multiple indicators of a maturing market. Indeed, across the twelve months of 2017 only March and April showed notably stronger YoY growth than the previous year (fig.1).
The Index performance in 2016 was largely driven by strong sales growth through smartphones, but this slowed in 2017. Sales growth through smartphones averaged 77% each month from July to December 2016. In the same period in 2017 it fell to 50%. Growth through tablets has also stalled (up 0.7% in 2017), and 2018 growth is expected to slow down further for all devices.
Says Bhavesh Unadkat, principal consultant in retail customer engagement, Capgemini:
“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.
“A second opportunity will be deepening relationships with customers and taking an insight driven approach to omni-channel retail – one which arguably remains a gap for many retailers across channels. Many have got it right across certain channels, however not across the whole customer experience across all channels. Finally, there is sometimes so much focus on technology and innovation we can forget retail basics – ensuring the product mix is right, availability is on point, the shop front is one to be proud of, and ensuring the team are well equipped to give customers the best service can be just as important. ”
Adds Justin Opie, managing director, IMRG:
“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 – including rising inflation, low wage growth and rise in the interest rate – are likely to have been influential and the first half of 2018 may be challenging too; discounting in the lead-up to Black Friday started deep into October in 2017 and have been widely available ever since.
“It may be that retailers will now find themselves caught in a cycle of discounting, which also happened in 2011 and 2015 and will probably extend long after the January sales, as the trading climate is tough at the moment. 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.”