High Streets Initiative · 6 June 2017

Health and beauty retailers evade record-low ecommerce growth with discounted lines

Health and beauty retailers
Limited spending power saw shoppers stick to online food purchases more than any other category

Britain’s online retailers experienced the lowest annual growth on record in May, according to new trading figures, after shoppers continued to stick to essential buys.

New statistics from the British Retail Consortium (BRC) and KPMG showed overall online sales growth of 4.3 per cent between April and May 2017, compared to a 13.7 rise in the same period in 2016 – the lowest annual growth since December 2012, when BRC’s online sales monitor began.

BRC experts attributed lower spending power of consumers to poor growth in online sales, while shoppers largely avoided “non-essential purchases”. However, health and beauty retailers saw the most positive growth after capitalising on value lines.

Further figures from Barclaycard showed consumer spending growth at 2.8 per cent in May, a 10-month low that mirrored the decline in ecommerce sales. Poor wage growth and rising inflation – currently at a four-year high – also took a toll on the retail world.

Paul Martin, UK head of retail at KPMG, confirmed online health and beauty retailers “continued to be the rising star” after bucking the trend of poor growth. Martin noted the recent good weather and the start of the holiday season as fuelling strong growth among online health and beauty retailers and the clothing industry.

“Elsewhere, the more seasonal weather in the month is likely to be behind fashion sales performing better,” he added.

Helen Dickinson, BRC chief executive, agreed that health and beauty retailers were rewarded for an innovative approach, managing to turn browsing into sales with late season promotions.

“For the second consecutive month, the increase in the online penetration rate has remained below one percentage point. Retailers will be increasingly looking to innovate and optimise their online channels to convert a greater share of online browsing into sales,” she commented.

Dickinson added that willingness among consumers to spend on non-food items would “largely be concentrated on value lines”. 

Offering advice to local retailers looking to reach their customers in tough economic conditions, Martin said it was vital to “master the art of customer-centricity and personalisation”.

“Ensuring the right products are available at the right time, and that surplus stock is not sold at significantly reduced prices, is becoming ever more important.  Success will come from an ability to target the online shoppers who spend more and return less,” he explained.

Adding comment to BRC figures, Alex Marsh, managing director at Close Brothers Retail Finance, said inflationary pressures and continuing wage stagnation could mean a difficult summer of trading for Britain’s independent retailers.

Marsh advised shop owners to invest in flexible payment methods to support spending, and outlined some other sectors which benefitted on high streets despite recent poor sales figures.

“Garden and outdoor sports equipment continued to grow as the weather improved. Jewellery and watch sales also increased in May, and furniture was a winner over the first May bank holiday weekend,” he said.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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