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The state of retail ecommerce during the 2016 holiday season

The concerns that global and local economic unrest would adversely impact holiday spending proved over-stated. In the UK, shoppers spent 16% more online between November 13th and Christmas Day (£25bn up from £21.55bn). Data released by the British Retail Consortium-KPMG Retail Sales Monitor showed online sales growth was up 9.5% year-over-year from October to December.

This trend was reflected in the US too, with data showing a 20% increase YOY for November and December and 12% increase in transactions.

The continued rise of Black Friday weekend had a pronounced impact on high street retail, as aggressive discounts from online retailers impacted non-food sales. Bricks and mortar saw a 1.6% YOY sales growth but department stores like Macy’s saw a drop (on average 4.8%).

It’s no coincidence that online sites like ASOS, Boohoo and Misguided posted strong results in January, whilst large high street brands like Next and M&S have taken a hit. High streets had their quietest December since 1998 and the total number of shoppers was down 2%. More than £2bn was wiped off the value of British retailers on Wednesday 4th January following the poor Christmas trading report filed by Next.

In this blog I look at some of the trends emerging from the holiday season ecommerce data.

More UK shoppers do holiday buying online

eMarketer data reveals that ecommerce share of holiday season sales in the UK has risen from 17.8% in 2015 to 20.3% in 2016. A study by HookLogic found the number of unique online customers increased YOY by 12.4% between November 7th to end of December and the number who made an online purchase increased by 13.6%.

Data from Visa UK reveals that online growth is much higher than store based spending; 5.5% increase in December vs. 0.7% for in-store.

Some retailers saw conversion rates at x2 to x3 higher in the final Thursday and Friday before the holiday season, indicating improved delivery capabilities are helping drive ecommerce growth. This is certainly reflected in the improved last order cut-off dates for online retailers and the surge in store collection orders for many high street retailers.

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Amazon takes more online share

Amazon announced it had its best ever holiday season.

Unsurprisingly Amazon’s share of ecommerce sales grew in the weeks prior to Christmas in both the UK and US, with products like Echo and Echo Dot home assistants in the best-sellers. More than 1bn Amazon Prime items were shipped globally during the 2016 holiday season. Sales were so strong, it struggled to maintain the stock to service them. Jeff Wilke, CEO of Amazon’s Worldwide Consumer Division was quoted as saying:

“Despite our best efforts and ramped-up production, we still had trouble keeping them in stock”

Mobile is huge for Amazon; more than 72% of worldwide customers shopped through mobile devices.

YOY traffic growth

Using PCA Predict’s own data from more than 745m shopping sessions, UK traffic grew in November/December but at a slower rate than the overall year (8% vs. 14%). However, Christmas Day was an exception, with 14% traffic growth.

 Mobile taking traffic share

 

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The annual growth for online retail sales was 16% according to CapGemini and IMRG’s e-Retail Sales Index. This reversed the trend for online growth deceleration in recent years and the growth was mainly driven by a big increase in smartphone sales.

Customers using smartphones helped drive sales growth in December, with sales from mobile devices increasing by 47% according to data released by IMRG and Cap Gemini, compared to a 3% decline in tablet sales. Smartphone sales made up 54% of all online sales in December, compared to 39% the previous year.

This mobile spurt is primarily the result of the increased range of large screen smartphones, including Samsung’s Galaxy S7 Edge which launched last year.

PCA Predict’s own data reveals a similar trend. In line with general device patterns in 2016, mobile phones have taken more traffic share (up from 31% to 39% though some retailers continue to report >50%), although conversion rates typically still lag behind desktop.

Phone usage spiked on Christmas Day, with 58% of traffic coming for smartphone vs. 46% in 2015. The increase in traffic share came at the expense of both desktop and tablet devices (with tablet actually decreasing in absolute terms from 6m to 5.8m sessions).

Time of day patterns shift

It’s interesting to note that customers show different time of day browsing patterns during the holiday season. For example, on Black Friday there’s a bigger surge in the early morning as bargain hunters scramble to be the first to get the best deals. The spike fades out by midday and continues to drop in the afternoon.

However, on Christmas Day the early morning is less active and the spike hits mid to late afternoon. This is typically when people have opened presents, have new cash to spend and then head online (or perhaps when one glass of wine too many has liberated their inner shopper).

In 2016 the Christmas Day peak extended to 10pm whereas in 2015 traffic dropped off at 9pm.

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Growth of overseas sales

Despite the retail gloom surrounding Brexit and the perceived impact it will have on our economic outlook for 2017, there are some opportunities for retailers. One of these is gaining market share from overseas customers in the face of a weak pound that makes UK prices more favourable.

A retail client of mine saw UK ecommerce traffic decline 18% YOY during the 6 week Christmas period from end November to start of January, but at the same time had a 76% growth from US, 1200% from Russia and from 120% from Germany (albeit off smaller bases). The net increase was 11% traffic growth.

Martin Newman, CEO of Practicology identified this at the end of last year:

“The industry will undoubtedly have a tough ride next year but if retailers can be agile to respond, then there are opportunities to ensure that they at least survive, if not thrive.”

Comments and questions

I appreciate this is a whistle stop tour of ecommerce trends for the 2016 holiday season but hopefully it gives you a flavour of what happened.

What did you notice in the data? What trends have you seen when analysing performance?

Please drop by and share your comments, questions and experience.