Online sales tipped to grow 12% in 2013 to £87bn, e-Retail Sales Index reveals

Online retail sales exceeded expectations in December 2012, with the IMRG Capgemini e-Retail Sales Index recording 17.5% year-on-year growth. This represents month-on-month growth of 12% on November 2012. Consumers spent an estimated £78bn at online retail stores in 2012.

IMRG and Capgemini are forecasting the online retail market will grow by 12% in 2013, with consumers spending £87bn online.

It was a very strong finish to the year for the online retail sector, with the Index recording growth of 14% for 2012 as a whole, said researchers. It was a year of two halves for the market, with H1 growth levels typically in the low teens and H2 levels in the mid to late teens.

Sales through mobile devices (including tablets) were particularly strong in 2012, with total sales up 304% on 2011. As mobile devices proved popular as gift choices this Christmas, it seems likely we will continue to see very strong growth throughout 2013, said IMRG and Capgemini.

Usually between November and December there is a rise of around 1% in the conversion rate, but this year there was a reversal of that trend with the rate actually dropping slightly. Although the sales performance was very strong, this shift in conversion rate suggests consumers are increasing their use of the internet as a research tool as part of any purchase decision, whether eventually made online or offline. The continuing economic situation is forcing many consumers to ensure they get the best possible deal for their spending, the Index found.

Andrew McClelland, chief operations & policy officer at IMRG, said: “It was a very strong finish to the year for the online retail industry, with growth coming in above expectation after a solid first half of the year. While growth of 17.5% for December in terms of actual sales is very impressive, one of the real talking points in these figures is the drop in conversion rate between November and December. Retail sites can be accessed through a range of devices and in a range of contexts, whether during a commute, in-store or increasingly in front of the TV. Consumers are going to carry out a lot of research prior to making a purchase, so in order to secure their custom the challenge to retailers is around providing both the value and the experience that will make them stand out from the competition.

“In spite of continued tough trading conditions as consumers concentrate of paying down debt, we are forecasting 12% growth for the market in 2013 as consumers look to get maximum value from every transaction.”

Chris Webster, head of retail and technology, Capgemini, said: “2012 has been turbulent  for the retail industry, but a solid if unspectacular Christmas made up for what has been an otherwise challenging year.

“The big stand out is mobile commerce and its growth in the last 12 months has been staggering. The developments in the technology and the steps taken by retailers to improve their mobile services have seen a shift from browsing, to a fully fledged commerce site integral to our shopping experience. Visits and sales from either a smart phone or a tablet device are nearly four times higher than last year – we are reaching a point where we are spending longer on our phones shopping than making calls.

“This year, we’ll see the role of mobile devices evolve as retailers use the technology as the default channel to reach us and personalise our shopping experience, whether we’re online at home, on the bus or even in store. Retailers will adopt a more connected retail model, merging the physical shopping experience with an online one, such as offering customers tablets to browse the internet while they compare products in store.”

Gareth Jones, group retail & strategy director at Shop Direct Group, said: “December was a storming month for our brands, with sales up 11% year-on-year against a record performance in December 2011. Customer adoption of m-commerce continued apace both in the run-up to and after Christmas, with sales via mobile devices representing 37% of our total online revenue – up an enormous 20.2%pts year-on-year.

“Peak trading came later than ever for our brands this Christmas, with the week commencing Sunday 9 December 2012 our busiest of the year. This reflects customers’ continued growing trust in the online and mobile retail model and our ability to deliver. Of course, it also highlights a level of pent-up demand similar to that seen last year. Customers’ budgets continue to be squeezed and many deferred their Christmas spending this year until the last possible moment.

“At a category level, we saw huge online sales growth in both footwear and accessories and electricals during December – up 24% and 22% respectively. Across our brands, our top performing item by far was the tablet, with more than 61,000 sold during the month and an enormous 91,000 sold during the six-week Christmas period as a whole. In contrast to 2011, we saw the tablet bug bite the whole family this year, with kids’ tablets taking up the top two places on our toy bestseller charts for the first time.

“Looking back at 2012 as a whole, the big themes of the year were mobile and personalisation and both will continue to be at the forefront of our e-commerce strategy for 2013 and beyond. In particular, the rapid adoption that we are seeing among customers of the more mobile 7in tablet offers exciting new opportunities to connect with customers wherever and whenever they choose to shop.”

Omid Rezvani, director of mobile solutions, eCommera, said: “It is most encouraging to see conversion rates now starting to reach a healthy percentage – indicating that retailers have made strong headway during 2012 in developing an acceptable mobile experience for customers. The evidence elsewhere suggesting that myriad new mobile devices were unwrapped over Christmas and taken online shopping in the sales from the comfort of the sofa. The result will no doubt be a further migration away from the desktop to a broad range of online devices through 2013. Getting down into the detail of these changing dynamics – online and offline – smartphone and tablet – and their implications – needs to be the new year’s resolution for every retailer.”