Retailers reported a year-on-year (YOY) increase of 19.4% in online sales, continuing a stellar year for the retail channel, with garden amongst the strongest-performing sectors.
While the sun was shining on the high street last month, internet transactions also put on a positive display, with May’s increase contributing to a growth average of 19% for the past three months from March to May. Overall, the past 12 months have seen an average growth of 13.8% in online sales.
Figures from the latest IMRG Capgemini e-Retail Sales Index reveal that, in a month that saw scorching temperatures, a Royal wedding, the FA Cup Final, and two Bank holidays, this was the highest YoY increase for May since 2010 and the strongest month overall since November 2016. Additionally, a market conversion rate of 4.8% (compared to 4.6% last year) marked the first YoY increase for 2018, reversing a recent trend of decline.
The celebratory mood was also reflected in a number of the sector results, with footwear and garden the real standouts, recording YoY growth of +54.4% and +40.2% respectively. Even more significantly, during the record temperatures of the first Bank holiday week, garden sector growth reached an astounding +74%.
Capgemini principal consultant in retail customer engagement Bhavesh Unadkat said the results, whilst great news, weren’t unexpected but believes there has been an upturn in consumer confidence. He said: “May is typically a strong month for retail and that was borne out in the results on both sides of the coin. UK sunshine over-indexed in May – coming in 18% higher than the last two years – and temperatures have also resumed after the much colder start to 2018. This has clearly created big wins in the seasonal categories such as garden and footwear but there is also a certain degree of optimism felt throughout the sectors driven by the Royal Wedding and the FIFA World Cup.
“According to GfK’s overall Consumer Confidence Index consumer confidence is up +2points versus last month, with a positive outlook for the year ahead despite the uncertain economic backdrop. With this in mind, retailers need to maximise the opportunities around the uplift in customer spending and make the most of influential external factors through relevant messaging and offerings to their customers to secure their market share.”
IMRG strategy and insight director Andy Mulcahy believes the growth in high street sales is more telling of retail growth and that May’s figures could be a “blip”. He explained: “Growth for the online retail market has been exceptionally strong so far in 2018, with May’s result being the highest for that month in eight years. Things have been tough on the high street recently, though better performance was reported in May – this may have been a blip prompted by the mood of national celebration last month and it’s telling that when physical retail does well, online does even better – recording its highest growth in 18 months in May. It’s becoming increasingly clear that shoppers are favouring online channels over physical ones to a greater degree than they used to, which is accelerating the pace of change for multichannel retailers.”
He feels, for the high street to continue to thrive, retailers need to evolve the shopping experience they offer in store. “There is nothing new in online taking a greater share of sales of course, the question is what happens to physical retail,” he said. “Traditional shops won’t vanish entirely – there will always be some level of demand for them – but how high streets and other retail spaces evolve more generally in response to lower shopper interest is a matter for some debate. Many speak about focusing on in-store ‘experience’ but in many cases the solutions don’t seem to be very different from what was there before. It seems likely that retail is in for a rocky period of readjustment, that might take several years, before blueprints for a successful physical retail space become more apparent.”