Online retail growth is set to dampen overall retail growth across Europe over the next year, according to a new report from financial giant Moody’s.
Moody’s annual European retail sector outlook report has predicted that rising online competition will continue to put pressure on traditional retailers’ margins, leading to “sluggish” growth over the next 12 to 18 months.
“Overall European retail sector revenues will remain anaemic into 2020 as online and discount specialists squeeze larger retailers’ margins, forcing them to reduce their prices,” Moody’s vice president David Beadle said.
Its negative outlook is based on a number of factors including rapidly changing consumer demand, as shoppers increasingly expect both convenience and value.
This shift to online retail is also driving the popularity of specialist stores like Asos and Boohoo who have far lower profit margins than their physical counterparts.
“The continued shift in demand towards online specialists means footfall remains in systemic decline in physical stores,” the report stated, adding that overall sector growth will “remain anaemic”.
Meanwhile online revenue growth is expected to remain in the high single to low-double digits.
Other factors include an ageing population and high youth poverty across Europe, further exacerbating the shift towards value and convenience.