December collapse completes online retail’s lowest ever growth
Online sales growth fell to -12% YoY in December, its lowest since March when the rate was still affected by lockdown comparisons. That’s according to the latest IMRG Online Retail Index, which tracks online sales for 200 retailers. This caps what has proven to be arguably the toughest year ever for online retail, with growth for 2022 coming in at -10.5% YoY, by far the lowest growth ever recorded for a year and the first time it has been negative (the previous low was +2.7% YoY in 2021).
Growth online for the Black Friday week turned out to be flat, which was a bit better than expected and was out of sync with the low demand of the previous 10 months. However this turned out to be due to volume being pulled forward, as was evident from the week following it; sales for w/c 27 November fell -7.3%, against a huge decline of -34% for the same week in 2021. The delivery disruption also saw a weak performance for w/c 18 December, as final delivery dates shifted earlier, with sales down -4.7%, and unable to build on the -22.4% decline for the same period last year.
The only positive growth for December was found in the sub-categories lingerie (+0.9% YoY), haircare (9.1% YoY), and makeup (8.3% YoY), though these were not enough to push growth for their parent categories – clothing (-6.1% YoY) and health & beauty (-11.8% YoY) – into positive territory. Clothing was the single main category to achieve positive growth for 2022 as a whole, at +2.5% YoY, with electricals (-18.1% YoY) and home & garden (-17.6% YoY) seeing significant declines.
The problem for online retail is clear to see – the average basket value increased from £121 in 2021 to £134 in 2022, driven up by inflation and other factors as products become more expensive for people to buy. The logical consequence being that the conversion rate (percentage of site visitors who complete a purchase) was at times in 2022 20% lower than at the same times in 2021.
Andy Mulcahy, strategy and insight director at IMRG: “Retail is a confidence game; if people feel they are comfortable with their finances and have some disposable income to play with every month, then retailers tend to see that reflected in general patterns of demand. Mid-2022, we revised our forecast range, making a decline of -10% the lowest estimate in our modelling, which is where 2023 came in. So, it really has been a poor year. The bright spot, however, is that traffic to retail sites has continued to grow even after the huge surges from the pandemic, so once the general economic malaise eases, retailers should be in a good place to benefit from the fact that people still like browsing and shopping for products. The issue is that many are expecting another tough year in 2023, with the first half, in particular, unlikely to provide much respite.”
About the ‘IMRG Online Retail Index’
The IMRG Online Retail Index, which was started in April 2000, tracks ‘online sales’, which we define as ‘transactions completed fully, including payment, via interactive channels’ from any location. The index is based on sales figures from 200 retailers, with the sample in 2022 totalling almost £24bn.