Nov 21, 2018
Reading time
3 minutes
Download the article
Click here to print
Text size
aA+ aA-

Fashion still strong online in UK but discounts rule

Nov 21, 2018

Online retailers may be outperforming their bricks and mortar-based peers at present but they’ve increased discounting by a third in the months leading up to Black Friday. That’s “in response to subdued consumer spending since the summer,” according to the latest Capgemini IMRG e-Retail Sales Index.

Discounting has run riot so far this year in the UK

The report on Wednesday said that online retail sales growth in October was the second lowest ever recorded (+8.5%) and also that m-commerce growth slowed in particular. Given how important m-tail growth has been to fashion e-tailers, that’s bad news. Sales from smartphone devices rose only 17.2% in October versus +53% last year.

However, “it was a positive month for the clothing sector on the back of its low performance in September” when growth was just 2.2%. The Index increased 10.1% year-on-year with the strongest performance in menswear at +49.6%. The report didn’t say whether that performance was driven by the discounting trend though.

Overall the  Index increased by 8.5% year-on-year, which was below the five-year October average of 11.4% growth. It was also the second lowest online retail sales growth figure of 2018, behind September’s 7.5% rise.

And the fact that the two weakest growth figures came in successive months also points to more bad news being ahead.

The report said that evidence for how tough it has been can be seen in the level of discounting on retail websites. In Q3 (Jul-Sep), 23% of overall sales revenue came from products that were marked down, which was up from 17.8% in the same period last year and was also a sharp increase on Q2 when it was 15%. 

It said “this is significant entering the Black Friday period, where retailers are reliant on discounting to capture shopper attention,” and it suggests that current discounts might be less appealing or might need to be deeper to attract attention.
Andy Mulcahy, strategy and insight director at IMRG, said: “The latest figures corroborate a trend that has become increasingly evident over the past few months – that, even months before Black Friday, a lot of retailers found themselves stuck in discounting cycles.

“The ability to run a flash sale or discounting campaign can be an important tool for stimulating sales activity, if order volumes are running below forecast. Now, halfway through Black Friday week, this poses an interesting question: will the launch of Black Friday campaigns struggle to capture shopper attention, as they are used to seeing discount promotions from those retailers, or will shoppers still see this period as the key time to get most value for their under-pressure finances?”
Bhavesh Unadkat, principal consultant in retail customer engagement at Capgemini, added: “The confidence of online retailers is challenged as they are caught up in cat and mouse play around discounting strategies. Do they protect margins by continuing to discount or do they pursue share of wallet as costs increase? Black Friday is now an established part of the cycle, meaning there are more data points for retailers to plan informed offers – it will be interesting to see whether they stick or twist on their strategies from last year.”

Copyright © 2023 FashionNetwork.com All rights reserved.