Adobe Analytics: UK ecommerce remains in recovery mode as consumers stay cautious in H1

Retailers have faced tough times in recent years, with periods of high inflation, a cost-of-living crisis, and significant economic uncertainty all putting pressure on their businesses. While some of these tensions and pressures on household finances have eased, the ecommerce landscape continues to experience significant shifts in 2024, with new trends impacting consumer behaviour.

The Adobe Digital Insights team has compiled a detailed report based on Adobe Analytics data analysing tens of billions of visits to UK retail sites, across 18 product categories and more than 100 million SKUs, offering unparalleled insight into the current online spending trends we’re seeing in the UK.

By analysing real-time spending data, drawn from actual online transactions, this report uncovers the key drivers behind the evolving digital economy and enables retail businesses to make informed decisions about their plans for the remainder of the year.

Here’s a look at the four most prominent trends that shaped UK ecommerce in the first half of 2024:

Sluggish Growth Persists

• Despite hopes for a stronger recovery after the challenges of 2023, UK online spending has seen only modest growth in 2024. By July, total online sales had reached £60.5 billion, just a 2.8% increase compared to the previous year. Rising costs of living have kept consumers cautious, with spending patterns from 2023 persisting well into this year. This slow recovery underscores the challenges retailers face as they try to reignite demand in a cost-conscious environment.

The "Lipstick Effect" in Full Force

• Consumers tend to indulge in small luxuries, like high-end beauty products, during tough economic times. In 2024, this effect has been pronounced, with online sales of premium lipstick and fragrance ticking up even as shoppers trade down in other categories. While overall spending on personal care products has shifted towards cheaper options, revenue from the most expensive quartile of lipstick and fragrance has risen by 3.5% and 6.3%, respectively.

Online Grocery Price Volatility

• After consistently rising through 2023, online grocery prices have experienced large swings month-to-month in 2024, creating ripple effects across the retail landscape. Although inflation has eased in non-essential categories like electronics and apparel, the unpredictable nature of grocery price changes has hampered consumer spending on these types of goods, as shoppers allocate more of their budgets to covering basic needs.

Shopping Events Remain Crucial

• In contrast to the rise of "always-on" sales, discounting events like Amazon Prime Day that create a heightened sense of urgency continue to be effective drivers of online spending. Flash sales during Prime Day in July saw UK consumers spend over £1.25 billion across the two-day period, illustrating that shoppers are still highly responsive to these time-sensitive deals.

What These Trends Mean for Retailers

For UK ecommerce businesses, these trends present both opportunities and challenges, and signal the need to adapt to a more cautious and selective consumer base. With slow growth and ongoing volatility in essentials, offering value-driven options is key. At the same time, savvy retailers can capitalise on consumers' willingness to indulge in small luxuries and take advantage of flash sales and major shopping events. As we head into the latter part of the year, businesses that sell online will be hoping to see a greater acceleration in spending as consumers start preparing for the holiday season – and the so-called “golden quarter” delivers the uptick in sales that has thus far failed to materialise in 2024.

Get Ahead with Insights from Adobe's Digital Economy Index

To equip your business with the data and tools needed to thrive in a rapidly changing market and stay on top of the latest insights shaping the digital economy, download the full Adobe Digital Economy Index UK Ecommerce Report [here].