Online retail growth slows below expectations in 2017

UK online sales growth missed expectations in 2017, indicating signs of a maturing market.

Sales growth slowed to an average 12.1% over the course of 2017, almost two percentage points below the forecast of 14%, according to the latest figures from the IMRG Capgemini e-Retail Sales Index.

This is also a sharp drop compared to 2016’s 15.9% average growth.

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IMRG and Capgemini said the fall in annual growth is one of multiple indicators of a maturing online retail market.

Indeed, across the twelve months of 2017 only March and April showed notably stronger YoY growth than the previous year.

The Index performance in 2016 was largely driven by strong sales growth through smartphones, but this slowed in 2017.

Sales growth through smartphones averaged 77% each month from July to December 2016 but in the same period in 2017 it fell to 50%.

Growth through tablets has also stalled (up 0.7% in 2017), and 2018 growth is expected to slow down further for all devices.

This is consistent with a three-year-bounce pattern of growth identified in the Index, with peaks starting in 2010 and repeating in 2013 and 2016, said IMRG and Capgemini.

2010’s high growth rate can be attributed to a host of factors (including improved website load speeds, user experiences, and connectivity), 2013 was when tablets started to account for a significant share of online retail, and 2016 was driven by the proliferation of shopping via smartphones.

Should 2018 follow this pattern, retailers can anticipate a new stimulus to be entering or proliferating the market during 2019.

Justin Opie, managing director at IMRG said: “A decline in the rate of online sales growth in 2017 was forecast, though it turned out to be sharper than expected. The macro economic factors – rising inflation, low wage growth, rise in the interest rate etc – are likely to have been influential and the first half of 2018 may be challenging too; discounting in the lead-up to Black Friday started deep into October in 2017 and have been widely available ever since.

“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. That said, 2018 does look set to be a transformational year for retail – with an increasing use of AI services anticipated plus the rise of ‘browserless commerce’ (through devices such as voice assistants). It may be that we see shopper behaviour shift significantly over the coming period.”

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