Online retail sales grew by +36% in 2020, the highest growth since 2007, the latest IMRG Capgemini Online Retail Index shows.
Multi-channel retailers were the star performers, boosting annual sales by +57% versus +9.1% growth at pure plays – the first time they have outperformed since 2017.
For Matthew Walsh, director of data and retail at IMRG, the widening gap between multi-channel and online-only retailer performance was the “story of the year”. Multi-channel retailers benefited when high streets were ordered to shut down in March due to the Covid-19 pandemic and “huge swathes of demand moved to websites”, he said.
In clothing, one of the worst performing sectors overall with just +1% sales growth versus 7% in 2019, multi-channel retailers lifted sales by +9% whereas pure plays recorded a -8% decline.
In home and garden – one of the retail sector winners with sales up by +74% for the year – the shift from store to online sales was significant, even though some stores were allowed to remain open during the pandemic. Here multi-channel operators recorded an +87% uplift year-on-year while pure plays, with no stores to close, reported a +27% rise.
Electricals was the top performing category with sales up by +91% during the year. Popular products included hair clippers, bread makers and computer monitors. In home and garden – the number two performing sector – garden furniture, outdoor heaters, home gyms and office chairs have been top sellers.
While demand for all these lines peaked in the early part of the year, computer monitors and office chairs have maintained high volumes due to the continued trend to work from home, said Lucy Gibbs, managing consultant at Capgemini.
Smaller retailers, those with a turnover of less than £10m, have tended to perform better than medium (£10m-£100m) and larger players (£100m +), said Gibbs. They benefited from their agility plus bigger operators struggling with out of stocks. Larger retailers also dropped paid-search, benefiting their smaller rivals, who were also boosted by ‘shop local’ campaigns, added Gibbs.
2020 has also seen an extension to the Black Friday trading period, which IMRG/Capgemini has been tracking at 185 retailers for four years. According to Walsh, retailers’ campaigns have moved from being hosted during the Black Friday week in 2017 towards starting three weeks out in 2020. The November lockdown also accelerated retailers to start earlier last year. “The trend is extending towards the beginning of November,” said Walsh.
Retailers coped extremely well with that peak and the unplanned peak from March to June, according to Metapak.
CRO Bruce Fair reported retailers, including Holland & Barrett, invested heavily in their ability to ship from stores versus warehouses. More retailers are now using Amazon as a shipping service, he added. They also managed consumer expectations on delivery by reducing their delivery promises – offering standard delivery only versus next day delivery and specific time slots, for example.
Looking ahead to 2021, Andy Mulcahy, strategy and insight director, IMRG, said the year was less predictable than 2020. While lockdowns have favoured online retail, Mulcahy expected an uptick in shop-based sales when stores reopen “as people want to go out and do things” but suggested retailers would need to “shape customers’ behaviour” and help form their new shopping habits.
There is also a question mark over whether they will spend money on “stuff or experiences”, Mulcahy said. Many will be desperate for a holiday and that money could be diverted from retail. The likely economic fallout must be considered too – it may lead to a squeeze on spend and drive a discounting culture. Alternatively, if the vaccination programme is a success, there could a rapid recovery and environmental issues could be back on the list of retailer priorities.
While researchers were unwilling to provide a forecast for online sales growth for the coming year; Chris Long, senior manager at Capgemini, predicted four key trends:
- Retailers becoming more agile with new delivery partnerships and online business models
- Opportunities to diversify through acquisitions and consolidations
- A revival of the local high street
- Changing the face of customer service to focus on the delivery driver and to reshape that role with new services for consumers to access
Tim Ryan, digital director at Seasalt, said the brand did well in 2020.
“We shifted our proposition and utilised the store in a different way with virtual store appointments and other propositions,” he said. “We have become more reactive to what customers tell us and have more engagement. We also saw benefits from people switching off paid search.”
Online sales were driven by traffic and conversion and there’s no sign of deterioration, according to customer and e-commerce director David Kohn. “It’s difficult to make predictions but the evidence, to date, is that online in furniture and homewares continues to be a very productive sector.”
Stores open or closed had not made any difference since sales had increased when stores have been shut, Kohn said. “We certainly need stores to open at some point, for events like Black Friday; while January is our biggest month of the year. But we had our highest ever company numbers in the week after Christmas,” he added.
Heal’s has also launched virtual consultations plus live chat that connects to people in store.
“Although online is doing extremely well, we need stores to reopen – we need both channels in operation ultimately,” Kohn said.
Despite being a strongly e-commerce led operation, volume still shifted online during 2020, according to Vivobarefoot commercial director Paul Walker. The retailer has targeted flat growth for 2021 but is 10% ahead of that forecast, Walker added.
“We like to zig when the market zags, so we will stop discounting when people start,” he said.
Lead times on footwear – usually around nine months – were challenging but the retailer is expecting to have full availability in coming weeks.