Online spending growth slows as high street ramps up promotions

| Press release
The recently released IMRG Capgemini e-Retail Sales Index revealed that the online sales was at its record low for the month of September.
  • Online spending growth slumps to record low in September
  • 1.9% month-on-month growth unusually low rate for September
  • Warm weather and in-store promotions cannibalise clothing sales online

The monthly IMRG Capgemini e-Retail Sales Index reveals that online spending rose by 7.6% in September compared to last year. Whilst British shoppers are still spending online, yearly growth in September reached the lowest rate in the history of the Index.

UK consumers spent a total of £3.9billion online in September – up 1.9% compared to August this year. However, this is lower than the average month-on-month increase for September, as shoppers exercise more caution ahead of Christmas and as the recession continues to influence consumer spending. Postal strikes have also acted as a deterrent for online shoppers, and will continue to be a key concern for e-retailers in the lead up to Christmas.

Clothing and electrical slowdown

Clothing, footwear and accessories sector sales stuttered, with sales rising by just 10% compared to last year (average year-on-year growth for this sector so far in 2009 has been 20%). This has impacted on overall growth rates for the Index as a whole as the sector traditionally acts as a key driving force for growth. Customers were lured away from the internet as September saw many retailers launch their promotional activity earlier this year. The high street reported an upturn in sales for the month .

Above average temperatures could have been a reason for shoppers to abandon their computer screens in favour of the high street – with the Bank Holiday Sunday and Monday falling into the September trading period this year.

E-retailers of electrical goods also saw an unusual slowdown in growth for September, with sales rising by 14% compared to last year.

Sector

% Change Month on Month

% Change Year on Year

Total Market

2%

8%

Clothing, Footwear and Accessories

16%

10%

- Accessories

10%

46%

- Footwear

1%

25%

Electricals

5%

14%

Beers, Wines and Spirits

5.2%

10%

Gifts

-1%

-1%

Health and Beauty

-3%

39%

Lingerie

-11%

8%

 

Mike Petevinos, Head of Consulting for Retail at Capgemini UK, said:
The results for September show a slowdown in the growth of online spending but we view this as a temporary blip and expect growth rates to return to the 15% year on year trend we have seen over the last year. The underlying trend is still that consumers are turning to the internet to make more informed purchase decisions.

Our latest stats should however act as a call to arms to multi-channel retailers, who enjoy higher basket sizes than the pure players but are not achieving the conversion rates online of their more focussed competitors. As competition increases the pressure on converting the consumers who hit your site should be a constant priority.

Tina Spooner, Director of Information at IMRG comments: “Although we have seen a dip in yearly growth during September, the online retail sector grew 13% in the third quarter and year-to-date the Index has grown 14% from last year.

The slowdown in e-retail growth during September indicates that consumers are being cautious ahead of the festive shopping season. The fine autumnal weather also appears to have had an impact on internet sales with increased footfall reported on the high street.”

Robin Terrell, Managing Director, John Lewis Direct said: “It’s clear that our customers are increasingly shopping online and enjoying the benefits of our online shopping experience more than ever. We are seeing growth online across all product lines, particularly fashion since the relaunch of our fashion site, but also encouragingly in home.

Despite the threat of postal strikes, we have ensured that our customers receive an uninterrupted service by switching to other carriers. Contrary to concerns about the situation leading to an increase in delivery prices, we can guarantee that will not happen at John Lewis. Further, customers can of course continue to enjoy the benefits of our deliver to shop for collection service.

The Index also breaks out the conversion rates and average basket size for e-retailers. The latest analysis from Capgemini and IMRG reveals that pure-play online and catalogue retailers have mastered the ability to convert clicks into sales, with a high conversion rate of 4.08% for September - 1.15% higher than the conversion rate for multichannel/high street retailers. However, consumers are still spending less per visit with pure-play e-retailers, with an average basket size of £110.

In contrast, multichannel and high street retailers are able to command a larger spend from shoppers per visit – encouraging consumers to spend an average of £167 per visit. As these retailers have multiple channels to reach shoppers, they have an increased opportunity to better target and tailor their offering for consumers. The figures reveal a clear call to action as multi-channel retailers have huge opportunity to take lead from pure-play e-retailers to more effectively link up their channels to drive up conversion rates.

About IMRG

IMRG (Interactive Media In Retail Group) is the industry body for global e-Retail. Formed in 1990, IMRG is setting and maintaining pragmatic and robust e-Retail Standards to enable fast-track industry growth, and facilitates its community of members with practical help, information, tools, guidance and networking. Consumers can be confident when dealing with IMRG Members because all have committed to operate using methods that are Honest, Decent, Legal, Truthful and Fair, and have undertaken to not bring the industry into disrepute. The strength of IMRG is the collective and co-operative power of its members.

About Capgemini

Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working - the Collaborative Business Experience - and through a global delivery model called Rightshore®, which aims to offer the right resources in the right location at competitive cost. Present in 36 countries, Capgemini reported 2007 global revenues of EUR 8.7 billion and employs over 83,000 people worldwide.

More information is available at www.uk.capgemini.com.

About the ‘IMRG Capgemini e-Retail Sales Index’

The IMRG Capgemini Index tracks ‘online sales’, which we define as ‘transactions completed fully, including payment, via interactive channels’ from any location, including in-store. These sales are predominantly internet-based today, but the Index remains ready to record e-retail sales conducted via whatever interactive channels the market may embrace in the future.

Over one hundred e-retailers now regularly contribute data to the IMRG Capgemini Index, including Airport Parking & Hotels Ltd, Arcadia Group (Burton, Top Man, Top Shop, Dorothy Perkins, Evans, Wallis, Miss Selfridge), Ascension Online, ASOS.com, Beautique.com, BeCheeky.com, Binends.com, Black Essentials, Blacks, Boden.co.uk, Boohoo.com, Boots Direct, Brora, Buyagift.com, Carphone Warehouse, Charles Tyrwhitt, Clarks, Cloggs, Comet, Co-operative Travel, Crocus.co.uk, Dabs.com, Damart, Daxon, Debenhams, Dobbies, e-flowersUK.co.uk, Ethical Superstore, Figleaves.com, Firebox, First Choice, Freemans Grattan Holdings, Furniture123, Game, Gameplay, Gamestation, Getting Personal.co.uk, GreatValueJewellery.com, Greenfingers.com, Home & Cook, Interflora, JD Sports, J D Williams, Jack Wills, Jason Shankey, John Lewis Partnership, Ladderstore.com, La Magia, La Redoute, lastminute.com, Lighting-Direct, LK Bennett, Lookfantastic.com, M and M Direct, Made in Sheffield, Marks & Spencer, Millets, Monster Travel, Musto, Naked Wines, NaturalCollection.com, New Look, Next, Peacocks, Perfect Handbags, PetPlanet.co.uk, PIXmania, Prezzybox.com, QED-UK, QVC, R C Roland, Redcats UK, Redfoot Revolution, Richer Sounds, Rubber Sole, Scales Express, Shoe-Shop.com, Shop Direct Home Shopping, Schuh, Serenata Flowers, Shudoo, Slurp.co.uk, SockShop, Sunshine.co.uk, Tesco.com Wine, Tesco Electrical, The Fragrance Shop, The Health Supermarket, The Natural Store, TUI UK, Turton Wines, Vertbaudet, Vie at Home, Waitrose, Wallace Sacks and Wilkinson Hardware.

Quotes from retailers:

Cameron McLean, PayPal’s General Manager for UK merchant services, said: “The slowdown in growth this month, whilst not unusual for the time of year, may reflect a pause for breath. But we think this is just a blip – PayPal’s recent UK Online Retail Report suggested that online retailing will continue to grow both sales and market share.

Jason Shankey, Managing Director of Jason Shankey Ltd said: “Whilst we have seen welcome increases in the sales of many of our hair and skincare brands this quarter, we are still facing an uphill struggle against counterfeiters who are flooding the market with fake GHD hair stylers. They are tempting many buyers away from genuine UK retailers, costing the economy hundreds of thousands, if not millions of pounds of lost revenue.


 

1 http://www.brc.org.uk/details04.asp?id=1 637
2 http://news.bbc.co.uk/weather/hi/uk_revi ews/newsid_8298000/8298973.stm