According to the latest IMRG Capgemini Online Retail Index, online retail sales in January saw a significant slowdown, with a decline of 24.4% reported. This decline was expected, as January 2021 experienced a surge in online sales due to the UK lockdown. However, despite the overall decline, the fashion category performed well.
Since the beginning of the pandemic, online sales have surged as consumers turned to webstores for non-essential purchases. However, as restrictions have eased and consumers have regained the option to shop in-person, the growth rate has slowed down. The decline in January 2022 can be directly attributed to retailers trying to compete with the staggering growth rate of 61.8% seen during the previous year’s lockdown.
Some online retailers had wrongly assumed that the growth rate of e-sales would continue at similar levels to those seen during lockdowns and post-lockdown periods. However, this assumption proved to be incorrect, as demonstrated by the recent news of Studio Retail preparing to call in administrators after over-ordering January stock based on optimistic projections.
Despite the overall weakness in January, there was an increase in the average spend per customer by over £20 compared to the previous year. This increase in average basket value (ABV) can partly be attributed to inflation running close to 5%. The ABV had experienced significant growth in the first half of 2021 but had been declining since August. January marked the first month in which the ABV started to increase again.
When looking at specific categories, fashion stood out as the best-performing sector in January. Clothing sales were up by 5.4% year-on-year, with womenswear (+25.2%), menswear (+16%), and footwear (+19.4%) all reporting positive performances. However, other categories tracked by IMRG did not fare as well, with skincare (-48.2%), make-up (-45.7%), and electricals (-36.7%) experiencing the poorest growth.
Andy Mulcahy, Strategy and Insight Director at IMRG, explained that the harsh year-on-year comparisons in the early months of 2022 are a result of the severe lockdown in the first quarter of 2021, which drove substantial online growth. He emphasized that the apparent freefall in online sales is actually a natural correction following the significant increases seen at the same time last year.
Lucy Gibbs, Senior Manager, Retail lead for Analytics & AI at Capgemini, acknowledged that January presented a mixed story for the retail sector. While the Online Index reported the largest year-on-year fall in sales, the high street experienced the opposite. This discrepancy is due to the comparison to last year’s lockdown store closures. As the pandemic subsides, the annual results will normalize, but economic and logistical challenges from the past two years continue to impact the outlook.
There are indications that prices may be increasing, as the average basket value has risen by 24% this month. This could be a result of ongoing supply chain disruptions and underlying cost challenges. Additionally, the major purchase index has fallen four points in January, suggesting that economic pressures are adding to consumer concerns. Retailers will need to focus on capturing a share of consumers’ wallets amidst increasing expenses and pent-up demand for travel, events, and dining out as they navigate through 2022.
Sources:
– IMRG Capgemini Online Retail Index: link
– Studio Retail news: link
