UK online retail sector enjoys ‘strongest growth in 3 Years’

As the high street reports the worst drop in sales for 15 years, the latest figures from the IMRG Capgemini e-Retail Sales Index reveal that online sales are bucking the trend by recording continued growth.

In March, shoppers in the UK spent a total of £5.1 billion online, 14% more than March 2010 and equivalent to £82 per person. Significantly, the Index has seen 18% growth during Q1 compared with the same period last year, which confirms it as the strongest first quarter performance in three years.

With the health and beauty sector (which includes perfume and make up) rocketing up 20% from February, and 32% year-on-year, the Index revealed the impact that Mother’s Day had on online sales.
Although March was not a particularly strong month for the gifts sector, it did see a 55% leap during the week before Mother’s Day, suggesting that when it comes to treating mum, Brits are still seeking a bargain.
Interestingly, despite a very strong start to the year, the travel sector took a nose dive in March, plummeting 15% on February and down 2% compared with March 2010. This is the first time the sector has declined year-on-year in over 12 months. This drop could be attributed to several factors.
A later Easter would have certainly been an issue, as last minute travel deals would have been put off until mid-April. However, the Budget, announced on 23rd March, is likely to have been the major contributing factor, as consumers tightened their belts in the run up to, and in the wake of, the Government’s severe austerity measures. This is also reflected in the drop in other big-ticket sectors, such as electrical goods, which saw an 8% decline from February.
Chris Webster, head of retail consulting and technology at Capgemini says: “March was a solid month for online retail; 14% annual growth is a healthy result and quite a contrast to the reports from the high-street. The 18% growth in the Index during Q1 is indicative of a new trend. Consumers are indeed tightening belts, but they are still shopping, and have simply become more strategic in their buying habits.”
Tina Spooner, Director of Information at IMRG comments: “The Index reveals an encouraging performance for the e-retail market during March and confirms that online continues to be the beacon for the UK retail market during these tough economic conditions, with the high street suffering its worst drop in sales for 15 years during the same period. The 18% annual growth recorded in the first quarter of 2011 is in line with our prediction for the year.
“IMRG’s recent online confidence survey revealed that over 70% of UK retailers expect online sales to remain healthy for the remainder of the year which, when combined with the solid growth recorded by the Index, indicates that the outlook for 2011 remains positive for the UK e-retail industry.”
The ever-widening gap between multi-channel and online-only retailers continued to increase in March. Those with both a high-street and online presence witnessed a 19% growth on average compared with March last year, while online experienced just 6%.
Industry quotes
Russ Carroll, UK Managing Director of Shopping.com, comments: “Despite the doom and gloom on the British high street, online retail sales continue to remain strong. For Shopping.com, health & beauty and clothing were our leading categories in March, with year-on-year sales growing above 20%.
“This tells us that consumers continue to buy essentials but are looking online to ensure they get the best deal. The same goes for gift buying as we must take in to account that Mother’s Day will have played a big part in health and beauty and clothing being our top categories for the month.”
Jonathan Brown, Head of Online Selling, John Lewis, said: “John Lewis online had another strong month with sales up over 24% with all product areas exceeding both 2010 sales, and our expectations. However it was interesting to see that whilst overall traffic saw slightly slower growth than we have been used to, customers who were on our website were converting at a higher rate, spending more each time they shopped with us.
“Fashion continued to lead the way with sales up over 40% up on last year as customers responded well to our new season ranges, especially in womenswear with especially strong performances from brands including Phase 8, Hobbs and Kaliko. It was also pleasing to see our childrenswear category, an area of recent focus, take great leaps forward outperforming last year by over 85%. EHT (electrical and home technology) continued its outstanding performance, in a tough market, to deliver an impressive +25% on last year’s sales. We saw core categories of IT and vision leap into action and each deliver over 60% increases on 2010 sales. Finally, our Home category delivered an impressive +15% year on year increase as customers continued to buy our lighting, textiles, cooking and dining offer in volume. So a good second month for the online John Lewis operation and with newness continuing to be a focus for the team, we are expecting to see some more strong performances online in the months to come.”
Phillip Rinn, Senior Director of advertising at eBay International, comments: “The latest IMRG Capgemini e-Sales Index highlights how the online high street is resilient to wider retail and economic trends. At a time when recent figures highlight wider retail sales have seen their worst monthly decline in 15 years, the 5% month-on-month increase in online retail revenue is particularly impressive and shows that at a time when belt tightening was expected across the board, online continues to buck the trend. For marketers, it has never been more important to ensure they have a strong presence on the online high street in order to grab a slice of that £5.1bn pie.”
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www.capgemini.com