H1 online retail figures show increasing consumer shift to e-commerce

British shoppers are spending more on average online than they ever have, with online retail showing a +16.8% year-on-year growth during the first half (H1) of 2018.

The growth percentage is the highest in the first half for eight years and the average basket value, at £94, is the highest it has ever been, according to the latest figures from the Capgemini IMRG eRetail Sales Index.

On average online retail has grown by +14.1% year-on-year in H1 over the past five years, while the average basket value for the past five years has been £85.

This above average performance comes in spite of consumer confidence being down and extreme weather conditions, such as the Beast from the East that brought snow at the start of the year and the recent heatwave. It also presents a stark contrast with the fortunes of the high street in general, which has seen a number of big name businesses including New Look and House of Fraser running into difficulty.

Clothing has enjoyed consistent growth during the year so far, recording +16.3% growth (YoY) in Q1 and +17.8% (YoY) in Q2 for an average of +17.1% over the half (other strong categories included garden and health & beauty). Earlier this week high street giant Next said its Q2 figures were boosted by the extremely warm weather as shoppers invested in summer wear, however it cautioned that some of these sales may have been brought forward from August.

Capgemini and IMRG too cautioned that the feel-good factor brought on by events such as the World Cup and Royal Wedding may have led to consumers spending more than they otherwise might have and that they will rein in spending in Q3.

“The performance for online sales in the first half of the year has been a lot stronger than anticipated. There are a number of factors that may be influencing that – the extreme weather events (both hot and cold), the Royal Wedding, World Cup etc – and it might be possible that the feelgood elements associated with some of those events has encouraged people to spend a bit beyond their means," said IMRG strategy and insight director Andy Mulcahy.

“This could mean that we see a pinch on shopper spend as we move through Q3 – though the weather in July has been incredibly hot – which may lead to an imbalance in online retail growth between the first and second halves of the year,” Mulcahy added.

Bhavesh Unadkat, principal consultant in retail customer engagement, Capgemini added: “The year started with a lot of doom and gloom and uncertainty around retail.  What has been encouraging is how well online retail has performed in H1, particularly in seasonal categories like Clothing and Garden.  These two sectors have delivered higher basket values (+38.0% and + 19.6% YoY respectively), with consumers becoming impulsive in their purchases as they refreshed summer wardrobes and prepared for more time spent outside.

“Despite that online-only retailers outperformed multichannel retailers during most of H1, with average growth at +18.6% and +14.7% respectively, multichannel actually closed the gap on last year’s YOY growth. Basket value growth was also stronger for multichannel retailers, with a +4% (YoY) increase in average basket value to £100.77, compared to only +2% (YoY) for online only retailers at £87.77.  It demonstrates the continued importance of an omnichannel presence for retailers – a focus on connected retail will help ensure that the ecommerce sales performance outlasts the good weather."

Despite the impressive growth of online retail, conversion rates for online retailers actually decreased overall every month other than May. This could be accredited to the continued trend of online shopping via smartphone devices, which are accounting for a larger share of total online sales but feature lower (albeit increasing) conversion rates. Indeed, spending via smartphone devices was up +39% against last year during Q2, although growth rates are inevitably starting to slow as this channel reaches maturity.