Online retail is levelling off in the UK

According to a report from Auctane and Retail Economics, online has accounted for 27% of total retail sales in the UK from 2022 to 2024.

However, the pre-pandemic long term growth trend anticipated that online penetration would be 29% by 2024.

The pandemic threw the trend temporarily into hyperdrive with online retail peaking at 31% in 2021.

Retail Economics chief executive Richard Lim told a packed audience of retailers at The Delivery Conference on February 11 that: “The pandemic was a blip in the UK, a £54 billion blip. The post-pandemic percentage of online sales compared to traditional retail sales has levelled off.

“This is due most likely to the cost of living crisis among consumers and retailers facing an operational cost crisis. The cost of labour, utilities, and shipping, for instance, all boomed. Margins were under much more pressure. Costs were often passed on to consumers.”

He added: “We have seen a shift back to store, and to omnichannel. Now online growth will be much harder fought, and growth in market share is likely to come from competitors.

“The true legacy of the pandemic is not growth of online at the expense of stores, it is a growth of omnichannel while the customer journey has become more fragmented and complex.”

It is a much tougher market for online retailers, who now have to work harder to create advantage over rivals.

Auctane CEO Albert Ko, said: “When the online world was growing 20-30% per annum retailers could just ride the wave. Now offering two day delivery and a good website is not enough. It will be about differentiation - proactive tracking updates, AI-supported route optimisation and much else. Winners will be decided by slimmer margins.”

A much more omnivorous consumer is engaging with brands in many more ways across many more channels, both digital and bricks and mortar, meaning retailers need to have a strong idea of where their value lies, and also be prepared to re-evaluate that on a regular basis.

The Report found significant generational differences in consumer satisfaction, with Gen Z being particularly difficult to satisfy. 

Institute of Customer Service CEO Jo Causon, told The Delivery Conference: “The balance of power has shifted to the informed consumer. Customer satisfaction has been in decline across all industries since the pandemic, partly because companies have struggled to hire and keep staff. In fact, 31% of us will pay more for an exceptional service.”

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