Online retail sales in the UK experienced their second-lowest October growth last month with a year-on-year increase of 8.5% but are forecast to soar by 12.5% to £8.1 billion during the current “Black Friday week” (19-26 November), according to new figures from IMRG.
The 8.5% growth last month shown by the latest IMRG Capgemini e-Retail Sales Index was the second-lowest October growth rate after a 7.1% figure in 2015 and also represents the second-lowest e-retail sales growth in 2018 (behind September at +7.5%) as the subdued performance of online retail since the end of summer continues, the e-commerce association explained. The total market growth averages amount to +9.5% for three months and +12.1% for both six and 12 months respectively.
The level of discounting on retail websites provides evidence for the tough period that retail has been experiencing. In Q3 (July-September), 23% of overall sales revenue came from products that were in sale. This was up almost a third on the same period last year (17.8%) and was also a sharp increase on Q2 (April-June) when it was 15%. This is significant entering the Black Friday period, where retailers are reliant on discounting to capture shopper attention, IMRG said.
Online retail sales growth generated through smartphone devices was also down in October, with a 17.2% increase year-on-year, compared to +53% last year. Despite this development, it was a positive month for the clothing sector on the back of its low performance in September (when growth was just +2.2%). The index increased +10.1% year-on-year, with the strongest performance in menswear at +49.6%.
Andy Mulcahy, strategy and insight director, IMRG, said: “The latest figures corroborate a trend that has become increasingly evident over the past few months – that, even months before Black Friday, a lot of retailers found themselves stuck in discounting cycles. In the third-quarter, the percentage of revenue from items sold at a discounted rate was up by almost a third compared to the same period in 2017.
“The ability to run a flash sale or discounting campaign can be an important tool for stimulating sales activity, if order volumes are running below forecast. Now, halfway through Black Friday week, this poses an interesting question: will the launch of Black Friday campaigns struggle to capture shopper attention, as they are used to seeing discount promotions from those retailers, or will shoppers still see this period as the key time to get most value for their under-pressure finances?”
Bhavesh Unadkat, principal consultant in retail customer engagement, Capgemini, commented: “The October sales increase represented a modest start to the final quarter, and it is clear that consumer confidence is low at present. The GFK total consumer confidence dropped by one point and Major Purchase Index decreased by two points in October – we believe that the anticipation of Black Friday and the political and economic uncertainties around Brexit discussions are factors contributing to this.”
For the Black Friday event which is taking place tomorrow, IMRG expects online shoppers in the UK to spend £1.54bn which would correspond to a 13.2% increase on last year. For the whole Black Friday week running from last Monday (19 November) to next Monday (26 November), £8.1bn are due to be spent in total (+12.5% up on last year).
IMRG explained that while sales activity continues to be at its peak on the actual Black Friday day itself, the campaigns that retailers run have extended over a longer period over the past five years to help ease the pressure on their operations (delivery, traffic to site etc.).
Back in 2014, Black Friday campaigns were typically just specific to the day, in 2015 they extended over a long weekend and in 2016 several retailers stretched their campaigns over a whole week (starting Monday or Tuesday leading into Black Friday). This means that there is no consensus on campaign durations; ‘Black Friday’ has no real start or end and can apply to any period technically.
“A challenge for retailers in 2018 is that many have been forced into running discounting campaigns well ahead of November, in part at least due to the tough year retail has been experiencing, so the number offering heavy discounts early in November may be higher this year. This in turn creates a domino effect where competitors of brands running wide-ranging discounting campaigns (‘25% off everything’) are pressured into responding by running their own flash sale,” IMRG said.
“An imbalance for online sales growth may also be a factor here – the first two quarters of the year came in at +15.3% and +17.1% respectively, but the third-quarter was far lower at +10.1%. There are a number of factors that may have influenced this drop; the question is whether the fourth-quarter will bounce back or shopper spend continues to be suppressed,” the e-commerce association added.
