Retail Insights: August's Performance Shows Where Retailers Need to Work Harder

Written by Duncan Clark on 27 September 2017

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Did you miss July's performance? Recap on last month's retail data before diving into August's stats. 

August's data shows that online orders continue to grow, whilst average order value in both the UK and the US declines. Here are the key takeaways from the results:

  • Total number of online orders continues to show double-digit growth, with a 16% increase compared to August 2016 on a like-for-like basis in the UK
  • However, this was slower than the 20% growth seen in July; meanwhile the US continued to see 20% growth year-on-year
  • Additionally, Average Order Value (AOV) declined in both the UK and the US on a year-on-year basis (August 2017 compared to August 2016), showing retailers need to work harder to achieve growth

Let's take a look at these findings in more detail and see what you can do to boost your performance...

How do the UK and US compare?

In spite of concerns about economic stability in the UK market, the online retail market continued to perform well in the UK in August 2017, with average growth in like-for-like orders of 16% during the holiday period. However, this was not as strong as the year-on-year performance seen in July, where both the UK and the US enjoyed growth of approximately 20%. The US outperformed the UK in this period, as it maintained its 20% increase, suggesting that the UK could indeed be facing more headwinds as consumers become more cautious.

This was also apparent in the change in average order value (AOV), which continued to fall in the UK, from £48.67 in July to £45.89 in August, but which increased in the US from $81.30 to $83.46 in the same period.

However, both the UK and the US market experienced an AOV that was below the six-month average, as the trend towards more volume but lower value orders continues to be a factor. This means that both UK and US retailers must target higher volumes – in particular by encouraging more sales via mobile, which is influencing this behavior – in order to mitigate any potential longer-term drop in AOV.   

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For a longer term historical view on AOV trends in the US, you can review this Statista report.

Our findings on the UK market resonate with the most recent report from KPMG, which indicates that online sales (excluding food) grew by 11%: “Despite the ongoing challenges for the industry, retailers achieved reasonable growth in August, which is positive news.” Despite the decline in AOV, Brightpearl data recorded a 14% uplift in terms of total order value, driven by the higher volume of sales. This means that UK retailers should be targeting 10% or more growth from their online channels in order to maintain momentum with the overall market.

The US Commerce Department has also released its data for August, which suggested a 14.2% growth rate for ecommerce, as reported by Digital Commerce 360. The report also says that August was a stronger month than July in the US, with growth accelerating, a trend which we have also observed. Our data shows that growth accelerated to around 20% in terms of total order value on a like-for-like basis. This means that online retailers must reckon with a 20% or more increase in order to keep up with the pace of this market and to avoid losing share to competitors.

 

Customer acquisition must be a priority

The average number of orders per customer in the UK remained stubborn at 1.23 orders – exactly the same as August 2016. Also the number of items per order dropped from 2.64 in August 2016 to 2.48 in August 2017. This underlines the importance of being able to widen reach to capture new customers as a key pillar of any growth strategy. As the KPMG report states, online penetration continued to increase, from 21% in August 2016 to 21.6% in August 2017, so it is vital for retailers to ensure they are present in front of new customers. Customer acquisition will remain a top priority. Collectively, these data points reiterate the fickleness of the online customer. It is hard to build customer loyalty in an online environment, and the increasing importance of mobile makes this even more challenging.   

Comparing the UK to the US, we see that the challenge is accelerating in the US market. The average number of orders per customer dropped by 7.3%, from 1.22 to 1.14. The average number of items per order dropped from 2.86 to 2.26. We would expect the UK market to echo this trajectory. Therefore, retailers will need to consider strategies for coping with these changes.

 

What can retailers do?

As competition intensifies and the market becomes tougher, the trends show that it is more important than ever to gain an understanding of your own metrics and how they compare to the benchmark averages. Data points such as total number of orders versus number of customers versus average order value – and how these are changing – are all key to identifying how your strategy is performing. The patterns seen in your own data will reveal whether there are weaknesses or where marketing efforts should be focused.

For example, while brand loyalty is hard in an online world, customers will respond to retailers offering a superior experience, especially when it comes to how you get in front of customers and the ease with which they can order.

Keeping abreast of any market changes is also absolutely vital. For example, Amazon’s patent for one-click ordering is due to expire, which could offer huge potential for ‘savvy retailers,’ as one report points out: “Undoubtedly, Amazon’s one-click buying checkout experience really helped the company to become one of the biggest ecommerce companies in the world.” It adds: “The more people that are able to experiment with creating, and even improving, a 1-click system, the more opportunity there will be for other retailers besides Amazon to decrease their shopping cart abandonment issues.”

Taking the right decisions, based on data and understanding how customers are behaving, will ultimately secure the future for retailers who actively engage in collecting and interpreting all the data they have at their fingertips.

Good luck and let us know what you think. How are you embracing the challenges of today’s retail environment?       

Duncan Clark
About the author
Duncan Clark

Duncan Clark has over ten years' experience working in analytics and product marketing roles, with a focus on translating data insights into usable information to drive business outcomes. He is a keen advocate of new technologies and has written extensively on how emerging technologies impact the experience of the consumer, and the way in which consumers and enterprises interact with one another.

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