A tough, tough start to the year for online retailers
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With trading conditions proving to be very difficult over the past few years, it was perhaps a surprise that peak trading fell in line with forecasts for online retail. To be clear, growth was still negative for that period, but leading into November things were looking like they might come out far worse.
January 2024: A Historic Low
The worse is now here. Or should that be ‘worst,’ as January 2024 has a claim to be the worst month for online retail demand in the history of our tracking index, which has been running since 2000. While it did not technically experience the biggest decline in its history (that was in February 2022), it had the feel for a market that has completely run out of steam.
Monthly Declines and Market Sentiment
Each week of the month experienced strong year-on-year (YoY) falls in revenue against declines from last year. The payday week, in particular, was very weak, with sales falling -9.4% against a drop of -11.1% YoY for the same week in 2023. E-commerce's immunity to economic downturns seems to be a thing of the past, with the narrative shifting from the 'death of the high street' to online retail facing unprecedented challenges.
Sector-Specific Insights
It's not all bad news though; health and beauty retailers are seeing some very good growth online at the moment. Retailers in this category put it down to being a bit ‘recession-proof’ as items such as makeup tend to be reasonably cheap and make people feel good. For other categories, especially in the clothing and gifting sectors, trade is very tough at the moment. For home and garden, the rate of growth in January was lower than at any point in 2023.
Outlook for 2024
So where does that leave us for the rest of 2024? At the start of every year, IMRG does a forecast that offers up an expected rate of growth for the year as a whole, plus two alternatives to provide a range for where growth could end up if things go worse or better than expected. This translates to 0% for expected growth, with a tolerance of +2% if things go better and -2% if things go worse. January had a ‘worse’ range of -3%, putting into perspective how bad that -7% at the start of the year really was.
Hope Amidst Challenges
We will be hoping for better performance as the year unfolds, though February hasn’t started off much better; the first week was down -7.3% overall. There’s no way of dressing it up, it’s been a tough, tough start to the year for the online retail industry.
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