Analysis: Is the appetite for ecommerce on the decline?

Retailers have long been asking if the high street has lost its sparkle, as consumers increasingly turned towards online and mobile shopping. But over the past 12 months ecommerce sales have also begun to decline, with retailers seeing profits tank and shares fall as a result.

While this is can be partly attributed to consumers cutting back on their spend as costs rise, the wake of Covid has also seen the self-proclaimed successor to bricks-and-mortar retail experiencing a marked slow in demand.

“Ecommerce sales in the UK, as measured by the Office for National Statistics have dropped every month this year,” Bloomberg Intelligence global retail analyst Charles Allen tells Charged.

“This is true of all the sub-categories – clothing, non-specialised, household, other, non-store (online only) and food – in all months. The categories other than non-store refer to the online sales of retailers who also have stores.”

So why are consumers moving away from the convenience of online shopping and will the move be a permanent part of the ‘new normal’? Are consumers heading back out to the high street simply because they have had enough of shopping from their sofa, or is there something more significant at play? Charged takes a look…

The Covid effect

Global economic difficulties are certainly having their fair share of impact on the sector and have been, in one way or another, since the start of the Covid-19 pandemic.

While physical retail closed its doors, ecommerce firms watched their custom boom as online shopping became the only way that people could spend their money in the middle of a nationwide lockdown

Businesses had to move quickly, pivoting to an ecommerce operation if they didn’t already have one and even online giant Amazon had to expand at pace in order to handle the increased consumer demand. It was widely believed that the Covid lockdowns accelerated the UK’s move to and reliance upon ecommerce by anything between five and ten years, depending on which report you read.

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This was all well and good while the pandemic supercharged online purchases and consumers continued to spend their money solely online.

However, the extra warehouse space and increased company headcount which was necessary during the pandemic boost has failed to pay dividends in the months following the reopening of the high street.

Many companies placed too much faith in ecommerce sales figures continuing to climb after the high street reopened, leaving them with large overheads, supply chain woes and a need to slash costs.

Data: the numbers

Data compiled by Retail Gazette showed that companies including fast-fashion retailers Boohoo, InTheStyle, Asos as well as THG, AO and Ocado all have watched their share prices plummet over the past 12 months.

Asos’ share price has declined by 80% in the year ending 31 August, while rival Boohoo watched its shares fall by 82% in the six months to 31 August.

Online grocery company Ocado, which partners with M&S, has also had a tumultuous period in the six months to 29 May, its share price falling by 73% and its sales by 8%.

Profits at a number of the groups have also tumbled in nearly all cases. Asos’ profits compared to last year have declined  by a staggering 118%.

Wine retailer Naked Wines watched its profits climb 33% compared year-on-year, despite its share price tumbling by 88%.

Will it affect the festive period?

Rocketing inflation and rising prices aren’t likely to help the situation and could push a number of brands which are teetering on the edge, over the top. head of UK & USA sales Matthieu Barral tells Charged: “With surging inflation pushing prices up by 11.1% last month, we’re likely to see a different festive period for many online retailers.”

Barral believes that consumers will lean towards spreading retail spend over a period of weeks or even months, which could damage ecommerce firms’ prospects over Christmas.

The cost-of-living crisis is prompting consumers to review their spending habits, and many are moving away from the traditional concentrated spikes of retail activity towards more spread out spending over time.

“Retailers are adapting their Black Friday offers to reflect changing spending habits: for example, John Lewis is releasing its deals earlier than usual this year. This is not just to get a head start on the competition – for the consumer, these extended deal windows give them a chance to weigh up their options while still taking advantage of the discounts on offer.”

How marketplaces and tech could turn the tide

Barral says that brands should look to marketplaces in order to sustain custom as shoppers change their spending patterns.

“Retailers who match their evolving preferences will fare best. Making use of third-party ecommerce marketplaces will be one effective route to reach more consumers – in our latest retail research, found that 57% of consumers cite marketplaces as their number one preferred ecommerce channel.”

With 70% of all ecommerce predicted to take place on marketplaces by 2025, Barral expects tech-friendly retailers to turn to these platforms to boost their sales, while investing in digital-first payments is also key to attracting and retaining frugal customers in today’s economy, he claims.

“Investing in digital-first payments is also key to attracting and retaining today’s cost-averse consumers.

“Even brick-and-mortar retailers like Sainsbury’s are now rolling out payment innovations to streamline the checkout experience and let consumers keep track of their daily spending, while 60% of the retailers we surveyed have increased their tech budget by at least 20% in the past two years.”



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