UK fashion e-sales growth hits new low in May says IMRG
UK clothing sales hit a new low online last month with just 7.6% growth as Britons kept their purses and wallets closed in the face of higher prices, dull weather, Brexit blues and uncertainty due to the general election.
IMRG Capgemini’s monthly e-Retail Sales Index showed overall UK online sales up 10.2% year-on-year in May. This was the lowest growth rate for the Index since October 2015 (when it was up only 8.7%), with the surprise announcement of the general election and rising inflation likely to have been key influencing factors.
In fact several online retail sectors saw particularly low sales growth rates, most notably clothing where growth of 7.6% was the lowest recorded for the month of May in the history of the Index. Menswear, which has been a bright spot in the UK clothing sector, suffered last month and so did another high-performing category, beauty, the latest report showed.
That could be extra bad news given that booming e-tail sales have been seen as one major reason for patchy in-store sales in recent periods, although it’s hard to get a full picture of what happened at this early stage.
We know that the latest Office for National Statistics figures covering physical store sales for May showed higher sales at specialist fashion stores. But that doesn’t include supermarket or department store fashion sales and they account for a huge amount of spending. And whether the maths across in-store and online sales adds up to higher, or even flat, total sales in the end is still open to question.
Meanwhile, other sectors to suffer last month included gifts, which rose only 5.5% for its lowest rate for May since 2009. And electricals actually experienced a fall with sales down 8.6%. This is the only negative year-on-year change the electrical sector has seen over the last decade.
Other interesting points for the month included sales growth through tablet devices seeing a record low in May. They were down 4.9% year-on-year, which is the lowest rate since IMRG and Capgemini started tracking this dataset in 2013. This is likely in large part to be due to consumers increasingly using larger-screen smartphone devices for shopping activity where they would previously have used tablets. Sales growth through smartphones was up 46.2%.
WHY THE SLOWDOWN?
So was May’s slowdown a blip? Possibly… but possibly not. The researchers said April’s results were already showing slowing sales linked to the election and May saw this effect magnified. But they added that rising costs may also be having an impact, with the latest ONS data showing that inflation grew to 2.9% in May. This will in part be due to retailers needing to pass on the higher costs of buying-in products to shoppers following the decline in the pound’s value since the EU referendum last June.
It’s unclear for now whether this is anything long-term to worry about, even though monthly dips will inevitably affect retailer profit margins.
Bhavesh Unadkat, principal consultant in retail customer engagement design at Capgemini thinks it might be part of a long-term trend. “As spending warms up with the start of summer, May and June are usually two of the strongest months of the year,” Unadkat said. “With ongoing economic and political uncertainty however, this month’s results show a clear reversal of that trend. Clothing is the lowest growth we have seen for May. Menswear and electricals are both down on the year and showing the second lowest and lowest performance since we started recording the sectors respectively. Health & Beauty has fallen by 2% year-on-year and 13% month-on-month. Retailers need to focus on maintaining and even gaining market share as consumer spending stabilises.”
But IMRG editor Andy Mulcahy said what happens this month will be key: “Shopper confidence tends to take a hit just before an election so, while the fact we were actually having a general election may have been a surprise, a drop in online retail sales growth preceding it is not. Growth usually rises again soon afterwards – even in July 2016, the month after the Brexit vote and all the uncertainty that came with it, sales were up 18.6%.”
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