Tough year ahead for online retail, says analyst

Online retail has become a maturing market with 2018 expected to be “tough”, a market analyst has warned.

According to the latest figures from the IMRG Capgemini e-Retail Sales Index, UK online retail sales rose by 12.1 per cent year on year in 2017.

However, compared with 2016’s year-on-year average of 15.9 per cent, the fall in annual growth is one of the indicators that the market is maturing, IMRG claimed.

Growth of sales made on smartphones slowed in 2017. They averaged 77 per cent each month from July to December 2016, but fell to 50 per cent in the same period in 2017.

Growth through tablets also stalled and 2018 is expected to see a further slowdown for all devices.

Bhavesh Unadkat, principal consultant in retail customer engagement at Capgemini, said: “2018 will be ultra-competitive, with continued uncertainty. Retailers will therefore need to be focused on their plans to both survive and grow. One opportunity for growth and differentiation will come from emerging technology, as we saw in 2017. Voice and social commerce, connected devices and AI all drove interest and investment and will continue to do so. The big challenge will remain how to drive value and industrialising this capability.

“A second opportunity will be deepening relationships with customers and taking an insight-driven approach to omni-channel retail – one that arguably remains a gap for many retailers across channels. Many have got it right across certain channels, however not across the whole customer experience across all channels. Finally, there is sometimes so much focus on technology and innovation that we can forget retail basics. Ensuring the product mix is right, availability, a shop front to be proud of, and ensuring the team are well equipped to give customers the best service, can be just as important. 2018 will be volatile, but very exciting, as we see the great retail industry again raise the bar.”

IMRG managing director Justin Opie commented: “A decline in the rate of online sales growth in 2017 was forecast, though it turned out to be sharper than expected. Macroeconomic factors – rising inflation, low wage growth, a 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 has 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.”