Pandemic brings good online sales growth for smaller retailers

The Covid-19 pandemic caused huge spikes in online sales growth for smaller retail businesses, according to data from online retail industry association IMRG.

Speaking at eCommerce Expo’s virtual 2021 event, Andy Mulcahy, strategy and insight director at IMRG, said that while there was also online growth for medium and large retail businesses, smaller businesses had done particularly well, with smaller retailers seeing more than 175% year-on-year online sales growth in the first few weeks of April 2020, and more than 425% year-on-year online sales growth in the 47th week of 2020, just before Black Friday.

“It’s not that the medium and large ones did badly,” said Mulcahy. “The small ones have just done astronomically well and increasingly well, actually.”

Anecdotally, many smaller local stores kept themselves relevant during the pandemic by shifting online, even if just by connecting with customers via Facebook or other social media platforms so they could take delivery orders while they put a more sophisticated website in place.

Mulcahy added: “These small retailers who have acquired a lot of new customers and sold a lot of stuff might now in a better place to be competitive.” 

IMRG’s figures also showed that medium and large businesses performed well compared with 2019, and the overall revenue growth of online retailers reached 36.7% year on year in 2020.

This online sales spike during the pandemic is no surprise, because when non-essential retail was forced to close, many people looked online for day-to-day tasks such as shopping.

Although month-on-month growth of online sales in 2020 was similar to that in 2019 for most of the year, April 2020 saw a huge spike at the peak of the UK’s first lockdown.

“Between March and April, the amount of money spent online [in 2020] was up by 35%,” said Mulcahy.

When looking at online sales for multi-channel retailers separately from online-only retailers, IMRG found that multi-channel retailers performed well in 2020 compared with 2019, with multi-channel retailers’ sales up 55% over the year as a whole.

Mulcahy put this down to consumers replicating their usual shopping behaviour online instead of in-store.

“For the people who went online and are maybe not that common online shoppers, what they did when the stores closed was they just transferred their behaviour online to those same retailers,” he said.

Other pandemic trends noted by IMRG included an increase in online sales for premium retailers during 2020, a pattern similar to the 2008 financial crisis, according to Mulcahy.

“People who are better off tend to be a bit better protected from the fallout of an emergency situation,” he said.

As others “gravitate” towards budget retailers to save themselves cash, mid-market retailers end up “squashed” out of the market, he added.

Clothing retail had a “really bad year”, said Mulcahy, with only 1% year-on-year growth, while electricals was the strongest-performing category in 2020 with 91% year-on-year sales growth compared with the previous year.

But Mulcahy pointed out that it is “not necessarily the case” that online is “booming all the time”. Although 2020 was positive for many online retailers, it was easy to perform better than the previous year, which saw “the lowest growth we’ve ever seen”, he said.

Looking ahead, Mulcahy warned retailers not to lose the quick decision-making that they had adopted during the pandemic which resulted in accelerated digital growth, and that “new normal” is a dangerous phrase.

“It has forced a lot of us to be a bit more SME in our thinking, which is a great thing,” he said. “We have to understand we are living through times of change.”