Is the eCommerce Bubble Bursting?
This week saw the worst UK ecommerce figures in 19 months, prompting fears that online retail was to join its high-street sibling in the dumps
Posted by Killian McAleese, 18th August 2011
Online retail has been the star performer of the industry. As the like-for-like figures from each month have come in, many of us have been close to cringing at the shocking difference between the performance of the high street versus its younger, online sibling.
Granted, not everything online was selling amazingly. One of the key elements in the massive growth we've seen in online sales has been the ability to shift high volumes of smaller goods like clothes, books and alcohol to vast amounts of customers well beyond the traditional high-street hinterland. This combination of cutting out high-street rents thus working from a lower cost-base, and the ability to employ technology and efficient delivery systems to reach a potential market-place vastly larger than the in-store experience can attract, has clearly been a winner.
But there is little room in this business model for high-ticket items like white goods and furniture where the margin is smaller with higher delivery costs, not to mention a sharp fall in the proclivity of the general population towards buying houses to put these items in.
So along with many of their retailing colleagues, the ecommerce operations of the likes of Focus DIY, Comet and Habitat did little to bolster profits overall, whether or not their online presence saw growth.
But the weight of heavy goods didn't slow overall online growth, for which double-digits were and are the norm.
We need to take a moment and gather some perspective. Think back to three years ago. Back in the days when people talked about 'Anglo-Saxon' banking, in the calamity of out-of-control markets and crashing banks, we thought we had learned something the hard way. Didn't we all look back across the previous decade and conclude that growth had an ugly side to it? That any model based on high growth was a bubble guaranteed to burst.
Where does that leave us when it comes to ecommerce? Is the growth of online sales – double digit growth – out of control?
'Slowest growth for 19 months'
This week we learned that ecommerce saw its slowest rate of growth for 19 months. Yesterday Retail Gazette editor Ben Sillitoe commented that “The retail sales slump on the high street has been widely documented but the e-tail industry has typically been immune to the slowdown, until now.” And what abysmal growth figure are we talking about that prompted his comments?
The July year-on-year figure of 11.5 per cent. The worst since January 2010.
Luckily we didn't fall into the terrifying woods of single digit growth, but are we wrong to be worried about this? 11.5%?
Perhaps, just perhaps, we should be more worried about the bubble eventually bursting. But I certainly don't think it's bursting in the coming months.
So much loss, but try to remember there are winners too 1st July 2011
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