Tuesday 10 May 2016 12:01 am

Online sales hit the brakes: Digital channel suffers slow growth in April

Online retail sales growth has slumped to its lowest level in three years, piling pressure on retailers already hard hit by a customer retreat from the high street.

Year-on-year online sales were up by just 6.6 per cent in April, more than halving the 15.4 per cent growth recorded in April 2015, the British Retail Consortium (BRC) and KPMG monthly sales monitor out today has revealed.

“With the online channel beginning to reach maturity in some areas, retailers are now having to fight hard to win a larger share of the customer's wallet,” David McCorquodale, head of retail at KPMG told City A.M.

Read more: Retailers rocked by sales shocker

Overall the BRC found that retail sales have decreased by 0.9 per cent on a like-for-like basis from April 2015, dragged down by record falls in fashion sales.

British high street stores last week were shown to have suffered their steepest drop in sales since November 2008 according to accounting firm BDO while market research firm GfK found consumer sentiment collapsed to a 15-month low in April.

The latest BRC figures reinforce the gloomy numbers from BDO that found fashion retailers posted their sharpest sales falls since the financial crisis in April.

There have been two retail administrations in recent weeks, department store chain BHS and fashion retailer Austin Reed.

“With consumers no longer thinking in channels, physical stores can continue to contribute to the success of a retailer’s online offer and vice versa,” said Helen Dickinson, chief executive of the British Retail Consortium. “It’s therefore critical for retailers to finesse their offer from clicks to bricks.”

Read more: What Next for the UK's struggling high street?

Despite the shrinking growth, online sales have been the driving force behind sales growth in the three months to April.

Digital sales contributed just over two per cent to total non-food sales growth while store based transactions fell by 1.3 per cent.

The flurry of promotional activities also played its part in driving extra online purchases, penetration was up 1.7 percentage points year-on-year, the largest year-to-date rise. 

“Despite a further slowdown in online sales during April, penetration rates remained high as cleverly timed discounting and promotional activity proved online players were no April fools,” added McCorquodale.

With brick-and-morter retailers facing significant hurdles so far this year, the outlook for online-only retailers would appear to be better. 

Read more: Death of the high street? Don't be so sure

“Online retailers are likely to run into similar trouble as others in terms of like-for-like sales declines but they won’t be hit as hard as BHS and Austin Reed,” Phil Dorrell, director of retail consultancy Retail Remedy told City A.M.

“Internet only retailers just don’t have the same cost base dragging them down,” he added.

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