Online slump is final nail in coffin for Covid 'new normal'

Predictions that Covid would kill off the high street as online-only shopping went “gangbusters”, have finally been put to rest, with 2024 witnessing one of the slowest starts for ecommerce sales since the world reverted from “new normal” back to good old “normal”.

According to the latest IMRG Online Retail Index, which tracks the online sales of over 200 retailers, ecommerce revenue fell -7% year-on-year in January against a decline of -3.5% during the same period last year.

In fact, since the high growth rates of the pandemic, online shopping revenue has declined -10% in 2022 and -3% in 2023, with a forecast of 0% growth in 2024.

The -7% drop for January is the second-lowest since the skewed lockdown comparison period in early 2022, with only December 2022 (which was impacted by Royal Mail strikes) seeing lower growth (-9.3%).

Several categories recorded poor growth online, including clothing (-10.8%), beers, wine and spirits (-23.3%), electricals (-8.8%), gifts (-10.3%) and home (-5.7%).

However, gardening saw a rise of +9.2%, an increase that IMRG puts down to the mild temperatures, while health and beauty was also up, +9.1%. In fact, health and beauty is proving the exception; it is the only category that has not declined for a whole month since June 2023.

IMRG strategy and insight director Andy Mulcahy said: “Up until around 2019, ecommerce was rightly regarded as an industry with high potential, buoyed by the notion that ‘everything was going online’ and the high street seemed in terminal decline.

“Around that time though, the overall growth rate for ecommerce had actually started to plateau. The lockdown period then gave us years of data that was heavily skewed, but what we are seeing now is not just a consequence of that anymore. The economic situation is dire, demand has been impacted, and ecommerce feels like it is no longer immune to tough times but is just as vulnerable as retail more generally and other customer-facing industries.”

Even so, Mulcahy does see a possible bright spot on the horizon. While the economic and geopolitical context is fraught and potentially intensifying, ecommerce has traditionally benefited when technology progresses; new devices, such as the tablet and smartphone, helped push up sales by increasing accessibility to retail sites.

Many of the “next big thing” technologies in recent years – such as voice, augmented reality, and the metaverse – have not delivered for retail yet, but AI has come on profoundly in the past 12 months.

Mulcahy concluded: “As AI becomes widely embedded in platforms and systems, the breadth and quality of personalisation it enables may well be what restores growth to ecommerce. It certainly seems like we can’t rely on stability in the macro environment to provide it.”