Andy Mulcahy
Strategy and Insights Director, IMRG
Ecommerce has been held under a turbulent state of affairs in the UK. Faith can be restored, however, as experts reveal the many ways retailers can experience growth despite industry declines.
IMRG’s Index, which tracks online sales for 200 retailers, has presented Year-on-Year (YoY) declines across major ecommerce metrics throughout 2022 and 2023. The steepest decline reported in 2022 was in February, at -31.7% YoY, and the market fell again a year later in February 2023 at -4.7% YoY. Therefore, ecommerce retailers cannot rely on metric consistency.
The pandemic unreliability effect
The pandemic brought astonishing growth, with some online product categories seeing revenue spikes of over +170% YoY. Singling out metric performance now would make it seem that online retail is ultimately in terminal decline. However, online retail performance simply cannot live up to pandemic highs.
The cost of living crisis has made it more difficult to move customers through the sales funnel, most noticeably at the ‘add to basket’ stage.
Cost of living crisis skews
UK retailers were hit with further metric unreliability as the cost of living crisis came into full effect, changing customer behaviour such as increased buyers’ hesitancy and reduced loyalty in their search for the best price.
Total market revenue performance has been negative for 26 consecutive months; categories such as clothing and gifts are seeing consistent declines, pulling down market averages. Customers are instead spending their money on cheaper, more sustainable products such as small appliances, for which revenue has grown close to +50% YoY in recent months.
In line with revenue declines, average conversion rates have been falling since the pandemic. The weekly average conversion rate (total sessions) in 2020 hovered around 5%. Now, they hover around 3%. One of the reasons for this decline is that the cost of living crisis has made it more difficult to move customers through the sales funnel, most noticeably at the ‘add to basket’ stage.
Optimisation techniques for metric reliability
Retailers are pulling out all their cards to experience growth. Creating unique customer experiences through personalisation and AI can increase conversion rates. IMRG research also suggests that price is the top consideration when customers look to buy online, with elements such as discounting being a favourite all year round.
For metric reliability, retailers can use customer data to learn preferences, such as how customers wish to interact with them. They can also monitor their online metric performance relative to the rest of the market to see if their optimisation techniques are working. This approach will enable retailers to adapt their strategy in real time for greater efficiency and growth.
