Online retail grew less than expected in 2017

Online retail sales grew by 12.1% year on year in 2017, according to the annual IMRG Capgemini e-Retail Sales Index. But although sales grew over the year, annual online retail sales were 2% below the forecast growth rate of 14% – and were below the previous year’s 15.9% online retail sales growth rate.

Justin Opie, managing director of IMRG, said several macro-economic factors, such as rising inflation and interest rates, may have contributed to the slow growth, and that retailers should expect 2018 to be even harder.

“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,” he said.

The lowest online retail growth of 2017 was recorded in December – 9.1% – despite the Christmas period usually being one of the busiest for retailers.

This could have been influenced by Black Friday becoming increasingly online-focused, dragging sales into the months leading up to December.

As technology is increasingly being used to make consumers’ lives easier, customers are shopping more often and in smaller amounts for convenience. This is one of the ways the spread of technology is influencing consumer behaviour.

Growth rates for online sales via devices such as smartphones and tablets were also below the previous year’s figures. The average monthly growth for smartphone-based sales between July and December 2017 was 50% down on the average monthly growth of 77% for the equivalent period in 2016. Tablet sales stayed relatively stable in 2017, with online sales growth for these devices reaching only 0.7%.

Online sales for all devices are expected to slow down in 2018, with retail growth of 9% forecast for this year – the lowest since the index began.

However, the research found that the low growth for online retail over the last few years is consistent with previous patterns. Despite the predicted low growth in sales, Bhavesh Unadkat, principal consultant in retail customer engagement at Capgemini, believes this year might instead show high technology adoption and experimentation in the space, which could see a more positive impact on retail in 2019.

Unadkat said a focus on introducing new technologies such as social media shopping, voice-driven shopping and artificial intelligence will help retailers to keep on top of consumer demand and will shift the retail landscape.

“A second opportunity will be deepening relationships with customers and taking an insight-driven approach to omni-channel retail – which, arguably, remains a gap for many retailers,” he said.

Retail is now shifting far beyond the battle between online and offline. Emerging trends, such as consumers using voice-controlled devices to order goods online and internet-connected technologies ordering their own stock, are just some of the advances that are changing the way customers shop, forcing retailers to adopt and adapt.