Retail hesitancy: Online sales drop as shoppers feel pinch of rising inflation
Online shoppers are spending less as the cost of living crunch starts to bite across the world, and consumers have turned to BNPL services to continue purchasing.
Global digital sales have dropped three per cent year-on-year, the first recorded drop in nine years of tracking by Salesforce.
The firm’s shopping index shows a drop in the first quarter, with a focus on 12 key markets including the US and UK.
Total order volumes dipped by 12 per cent as the cost of living crunch started to see shoppers hold back.
However, some nine per cent of global spend in the first part of the year was through BNPL services. This is an increase of 20 per cent year-on-year and a nine per cent rise versus the fourth quarter of 2021.
Product categories to mark the greatest inventory drop include toys and learning, which fell 23 per cent, and appliances, which dropped 12 per cent.
Europe’s online sales were especially impacted, down 13 per cent, as countries struggle with rising energy and grocery costs.
It comes as economists said on Wednesday that consumer demand will not see a significant drop in the coming months despite tightening purse strings across the country.
Retail demand will be protected by shoppers dipping into lockdown savings and using buy now pay later services, despite increased pressure on household budgets, according to KPMG/Ipsos Retail Think Tank (RTT) members.
Evidence showed households were turned to credit to “tide them over,” according to Ruth Gregory, senior UK economist at Capital Economics, pointing to a £1.9bn leap in consumer credit in February.
She added: “In the months ahead, some of the squeeze on households’ real incomes will be dulled by employment and earnings rising further.”
There was “scope for consumer spending to continue to rise as real incomes fall,” Gregory explained. “Clearly, though, the longer the drag on households’ real incomes lasts, the more likely it is that households change their spending behaviour”
However, clouds are on the horizon for more muted health” for the sector in coming months, according to KPMG’s head of retail, Paul Martin.
Conflict in Ukraine and lockdown in China is expected to result in accelerating food prices, with higher fertiliser costs and wholesale food prices, Martin added.