Online sales fall as shoppers feel the pinch of rising inflation

Thursday, April 21, 2022 2:46 PM

Online shoppers are spending less as the cost of living crisis begins to reverberate around the world, and consumers have turned to BNPL’s services to keep shopping.

Global digital sales fell 3% year over year, the first drop in nine years of tracking by Salesforce.

The company’s buy index shows a decline in the first quarter, with a focus on 12 key markets, including the US and UK.

Total order volume fell 12% as the cost of living crisis began to force buyers to hold back.

However, around nine percent of global spending in the first part of the year was made through BNPL’s services. This is an increase of 20% year-on-year and 9% compared to the fourth quarter of 2021.

Product categories with the largest inventory declines include toys and learning, which fell 23%, and home appliances, which fell 12%.

Online sales in Europe were particularly hard hit, down 13%, as countries grapple with rising energy and grocery costs.

It comes as economists said on Wednesday that consumer demand would not see a significant decline in the coming months despite the tightening of purse strings across the country.

Retail demand will be protected as shoppers dip into lockdown savings and use buy-it-now and pay-later services, say KPMG/Ipsos Retail Think Tank (RTT) members, despite increased pressure on household budgets.

Evidence has shown that households have turned to credit to “help them out”, according to Ruth Gregory, senior UK economist at Capital Economics, pointing to a £1.9bn jump in consumer credit in February.

She added: “In the coming months, some of the pressure on real household incomes will be eased by employment and incomes which will rise further.”

There was “a possibility that consumer spending would continue to rise as real incomes fall,” Gregory explained. “It is clear, however, that the longer the pressure on real household income lasts, the more likely it is that households will change their consumption behavior”

However, clouds are looming on the horizon for more moderate health” for the sector in the coming months, according to KPMG head of retail Paul Martin.

The conflict in Ukraine and the lockdown in China are expected to cause food prices to accelerate, with fertilizer costs and wholesale food prices rising, Martin added.


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David A. Albanese