Retailers need to push good behaviour in forecasted tough 2020 online
Following the lowest year-on-year growth for online sales, as recorded by IMRG Capgemini in 2019, the forecasts for this year are only marginally better but there is a great disparity in the performance of individual categories.
Over the course of 2019 online sales growth measured 6.7%, compared with 11.8% in 2018, which was the lowest ever recorded by IMRG Capgemini. It only hit this level after a particularly strong end to the year with Q4 year-on-year growth reaching 11.3%, of which much was derived from the impressive 16.4% uplift in November.
Speaking at a breakfast event organised by IMRG Lucy Gibbs, managing consultant for retail insight at Capgemini, says: “In 2018 there was a very strong first half but then it dropped off. Consumer confidence was down at the end. This meant a negative start to 2019. In the second half there was more of an uplift, although political headlines were in the news and this held back spending.”
Online-only retailers performing better
Across the year it was interesting to note that online-only retailers recorded 10% growth versus a much weaker 4.8% for multi-channel players. Gibbs suggests this was probably down to the online operators more likely resorting to discounts whereas the multi-channel retailers were hopeful of holding onto margins. With 60% of the IMRG Capgemini index comprising multi-channel players this clearly adversely impacted the overall sales performance for 2019.
There was also some disparity between the growth of the different price point retailers, with budget enjoying a gain of 11.2% on 2018, compared with the premium retailers that achieved 4.3%, and the perennially squeezed mid-market managed only a modest 1.7% growth rate.
Within these numbers there was a great difference between categories. Health and beauty was up 25.7% on last year. “The last couple of years it has done really well. Lots of new players coming in and using new technology – such as augmented reality and the subscription-type players. It’s also been popular with vloggers,” says Gibbs.
In contrast, gardening had a torrid year with a drop of 40.3% as it found it hard competing against tough comparatives in 2018 on the back of the very hot summer. Electricals is often an interesting category and 2019 was no exception as it was down 14% overall, with the only positive months recorded from September onwards. There was a big uplift in October of 12% versus a negative 23% in September.
Effects of Black Friday
This followed through into the Black Friday period when during the eight days of the promotion period electricals was the winning category with 16.7% growth. This contributed to the overall market registering an uplift of 11.7% over this time-frame.
Andy Mulcahy, strategy and insight director at IMRG, says: “Black Friday probably papered over retail’s cracks. Demand was low earlier in the year, particularly over summer, and growth for the year was running at just 4.9% up to October. A solid December, albeit against weak year-on-year growth in 2018, off the back of an explosive November have made the full year result look much better at 6.7%.”
He highlights that although the number of Black Friday campaigns was the same as 2018 – among the 210 retailers monitored across both years – they were spread out more across the month, with activity beginning at the start of November. “It went early and the question was – is it [trade] being sucked in early,” he asks, but adds that this was not ultimately the case and there was a big fourth week to the promotion period after a quieter week three.
Among the notable sales figures within Black Friday week was the 16% overall gain on the Monday, the 6.8% uplift on the big day itself, while clothing gained 30% on the Saturday, and health and beauty enjoyed growth of 30% over the Saturday and Sunday.
Messaging around sustainability
Also noticeable, according to Mulcahy, has been the increased messaging around sustainability and charitable causes included on retailers’ websites. Of the 300 companies monitored by IMRG 19.3% had prominent sustainability messages and 11.7% had messages around their support for certain charities. “If you look again next year then I suspect it will go up again,” he predicts.
Chris Heap, VP of retail and consumer at Capgemini, agrees that a major trend for 2020 will be around retailers not simply operating to make money but also doing “good” at the same time: “Businesses today are finding that doing good, also means doing well. Will 2020 be the year of best behaviour? And what does it look like?”
Certainly with 15% of consumers now making buying decisions on the basis of a brand’s purpose (which is growing 100% year-on-year) retailers run the risk of missing out on these people if they do not look to do things outside the act of simply making money. He cites Microsoft recently stating that it is to go carbon negative, and there is also the recent move by Starbucks to boost its sustainability objectives, as examples of this move towards embracing a mission.
But such moves must be done with authenticity, according to Heap, who suggests consumers are “becoming much more savvy about what good behaviour looks like”. For those retailers that can achieve this then the prospects will be more positive, which will certainly be helpful as the forecasts from IMRG Capgemini for this year suggest a tough time ahead.
Hoping for footballing success
Using new predictive tools, developed by Capgemini, the expectation is that year-on-year growth for 2020 will come in at 7.8% – a modest increase on the 6.7% in 2019. Within the categories the forecast is for growth of 7.3% in clothing, 6.2% in BWS (beers, wines and spirits), 0.2% in gifts, 8.9% in home and garden, 29.7% in health and beauty, and a fall of 6.7% in the erratic electricals category.
Although Mulcahy suggests that much could change among these forecasts if the England football team has a good run in the forthcoming European Championships, of which some key games will be played in the UK!
Words by Glynn Davis
