Figures show online retail replacing high street shopping

Online shopping is gradually replacing face-to-face spending, as the growth in consumer spending continues to slow.

The latest figures from Visa’s Irish consumer spending index show a 4% increase in household spending, year-on-year, in January. However, the rate of growth remains below the average of the series, which began in September, 2014.

One of the key trends is the continuing divergence between online shopping and spending on the high street. Face-to-face spending fell by 0.7% year-on-year. Although marginal, that is the fourth decline in a row.

However, e-commerce is growing. Spending was up +12.3% year-on-year, with the rate of expansion in double-digits for the sixth month running, despite easing to the weakest growth since July last year.

Spending increased over the year to January in all but one of the eight sectors monitored, the exception being clothing and footwear, which declined 1.9%. That was the fifth decline in the past six months, following a slight improvement in December.

The largest increase in expenditure was in transport and communication, where spending rose by 10.8% — the third successive month of growth in that sector.

Both the hotels, restaurants, and bars, and recreation and culture categories also recorded increases in spending. There was a 6.7% rise in the amount consumers spent on nights-out and hotel accommodation, and a 5.4% increase on items such as cinema and theatre tickets.

Food and drink spending increased by 3.1% for the second month running, and expenditure in the household goods category was up 4.0%, year-on-year.

Visa country manager for Ireland Philip Konopik said the pace of the move to online shopping was a challenge for Irish high street retailers.

“As the divergence between the growth of face-to-face and e-commerce spend continues, the clothing-and-footwear sector remains the most affected,” said Mr Konopik. “With five months of decline over the past half-year, it is reflective of the shift consumers have made to online shopping, with UK retailers benefitting from the weak sterling exchange rate.

“The challenge for Irish retailers will be to put measures in place, over the coming months, in order to differentiate their offers, and encourage consumers back to the high street, as well as to their own websites.”

Andrew Harker, senior economist at IHS Markit, said the figures showed a positive spending start to 2017.

“The pick-up in the rate of growth in January provides some reassurance that the recent slowdown in the pace of expansion has come to an end, after December had seen the slowest rise in spending for 27 months,” said Mr Harker. “Other timely data, such as business survey figures, unemployment data, and consumer confidence numbers also suggest a more positive start to the year.”

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