A recent report by the IMRG Capgemini Online Retail Index has uncovered a noteworthy shift in UK consumer behavior when it comes to online shopping. Contrary to expectations, consumers are now prioritizing quality over budget prices, resulting in a boost for mid-market e-sellers. This finding challenges the assumption that consumers would turn to budget retailers due to the current cost of living crisis.
The report reveals that sales of mid-market goods saw a significant 4% increase in July, making it the only price level to experience a rise in sales. In contrast, online retail sales for budget goods fell by 16% in the six months leading up to March, while premium goods saw a decrease of 9% and mid-market goods only dropped by 5%.
In addition, the report tracks the Average Basket Value (ABV) and highlights that it has risen from £106 in January to £146 in July. This suggests that UK consumers are reluctant to compromise on high-quality items, instead opting for mid-market options to balance their budget constraints.
Furthermore, the report notes that both the premium and mid-market categories have seen movement in their ABV. This indicates that discounting is being utilized as a strategic tactic to drive sales. Budget retailers, on the other hand, have limited room for offering discounts as their ABV has remained stagnant. Simon Binge, Commerce Senior Manager, Customer Transformation at Capgemini, commented on this pattern, stating that consumers are still refusing to compromise on quality and that discounting is assisting them in higher price points. However, it remains to be seen if this behavior and retail promotional activity will persist in the face of potentially worsening economic conditions in the near future.
Overall, this data suggests that mid-market e-sellers are reaping the benefits of the shift in consumer behavior towards prioritizing quality over budget prices. As the cost of living crisis persists, consumers are still seeking high-quality items but are willing to compromise by choosing mid-market options. This presents a promising opportunity for retailers operating in the middle price segment to attract and retain customers. However, the longevity of this trend will depend on the economic conditions in the coming months.
