Online retail recorded its worst January sales growth (+7% YoY) in three years last month, as the industry’s poor recent sales performance continued into the New Year, according to the IMRG Capgemini eRetail Sales Index. The month provided little relief to retailers on the back of December’s all-time low sales growth, as it recorded just over half the growth figure achieved during January last year (+13.9%).
January growth was actually marginally above the three month average of +6.3% (YoY), but that was largely due to December’s record-low performance. When looking at the six and 12-month averages, January fell below the growth rates of +7.9% and +11.2% respectively.
Health and beauty continues to resist the struggles of the overall index, enjoying a +8.1% (YoY) growth in January. However, it was a bleaker month for gifts and electricals, which recorded -25.8% and -19.1% respectively.
Andy Mulcahy, strategy and insight director, IMRG said, “2019 could well prove to be a very challenging year, and the January growth was a slight improvement on the recent difficult trading conditions.
“The discounting that has been rife since all the way back in July continued into January as expected due to post-Christmas clearance, the challenge for retailers now is how to ease off the reliance on discounting for driving sales.
“As we’ve moved into February, many sites have either switched off discounting or lessened the prominence of such offers. It’s now a matter of holding nerve, but the positive thing for clothing retailers is the weather, it has been very mild and sunny for this time of year, so that may help to stimulate activity on spring ranges that isn’t linked to discounting; you should never underestimate the potential impact of the British weather on retail.”
Bhavesh Unadkat, principal consultant in retail customer engagement for Capgemini said, “January growth was half that of last year and below the 5-year average for the month, failing to recuperate sales from the poor performance in December 2018.
“The cautious start to the year is unsurprising given that pressures on the retail sector remain high as a result of further store closure announcements, continued low consumer confidence and economic uncertainty as we hold our breath, and our spending, ahead of further news on how the UK will exit the EU.
“One area where we are seeing a big impact is electricals with continued YoY declines, often correlated to the confidence index, coupled with decreasing basket values there is an indication that customers continue to hold back on spending, especially in the more luxurious and higher ticket categories.”