January 2022 saw low growth in online sales

The start of 2022 saw slow sales growth for online shopping, with a 24.4% year-on-year (YoY) drop in online sales in the first month of the year, according to the Capgemini/IMRG Online Retail Index.

This seems significantly different to the 61.8% YoY increase in January 2021, which Capgemini puts largely down to the UK still being in lockdown and driving up online purchases.

Andy Mulcahy, strategy and insight director at IMRG, said: “The first quarter of 2021 had a severe lockdown in place which drove huge online growth, so the YoY comparisons for the early months in 2022 are going to be harshly negative as a consequence. This can make it seem like online sales are in freefall, whereas actually it is just a natural rationalisation of the 50-60% increases we saw this time last year.” 

Online shopping saw a huge increase over the past two years as lockdowns forced UK residents to use online channels to perform day-to-day tasks, such as shopping, from their homes.

The sudden increase in orders led many retailers to increase their staff to meet the rise in online orders – for example, in March 2020 Amazon announced that it would be adding 100,000 extra workers in the US to address a shift in consumer shopping behaviour caused by the pandemic.

Tesco also hired 16,000 staff to cope with Covid-19-induced shopping habits. Meanwhile, Ocado was forced to pull its website after a huge spike in orders at the beginning of the 2020 UK lockdown period, later choosing to boost its technology workers by 300 in the first half of 2020 to cope with increased demand as a result of the pandemic.

As 2021 drew to a close, the 2.7% market growth across the year was the lowest rate of online growth recorded in the 22 years of IMRG and Capgemini’s index.

While there are reasons explaining January’s slow sales growth, Capgemini warned online retailers may start feeling the pinch both because of lockdowns lifting and because of the rising cost of living.

But while sales were low, average basket spend was up month-on-month, from £106 in December 2021 to £115 in January, after falling steadily since August 2021.

Out of the verticals most popular for online shopping in January 2022, fashion was top with clothing seeing a 5.4% YoY increase in online sales – when further broken down, womenswear saw a 25.2% YoY increase in online sales, closely followed by a 19.4% increase for footwear and a 16% increase for menswear.

But other categories didn’t do as well, including skincare, which saw a 48.2% YoY drop in online sales in January this year; makeup, which was down 45.7%; and electrical goods, which saw a 36.7% drop in online sales.

As things begin to ease, Lucy Gibbs, senior manager, retail lead for analytics and artificial intelligence (AI) at Capgemini, claimed eating out and events, as well as finally being able to travel, will be a spending focus in 2022.

Prior to the pandemic, online shopping was already predicted to become the predominant way to shop. The year before the pandemic hit, Capgemini predicted more that half of consumers would be doing their food shopping online by 2021. In 2018, 53% of younger shoppers said they preferred getting their retail info online rather than in-person.

Many believe the pandemic’s shift to online will continue after the pandemic subsides, with O2 Business and Retail Economics finding that 44% of consumers don’t plan to return to their pre-pandemic ways.