Sunday 23 July 2017

Consumers switch to online shopping as sentiment drops to near two year low

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Charlie Weston Personal Finance Editor

Consumers made a big switch to online shopping in December.

This was reflected in a surge in spending online by consumers in the lead up to Christmas, but a decline in face-to-face expenditure.

It comes as separate research shows a fall in consumer confidence in December.

This sent the KBC consumer sentiment index to a 22-month low, as householders have concluded that the economic recovery has over-promised and under-delivered in the past year.

The KBC Bank Ireland consumer sentiment index slipped to 96.2 in December from 97.8 in November.

Although it was a marginal drop in December, it was eight to push the index to its lowest level since February 2015.

Fears about Brexit and Donald Trump’s election appear to be rattling consumers, KBC Bank economist Austin Hughes said.

He said there was an absence of a feel-good factor for consumers.

Mr Hughes said: “At current levels, the consumer sentiment index is still consistent with a continuing increase in consumer spending.

“But the flagging momentum of the sentiment index testifies to the marked absence of a widely felt ‘feel-good factor’ that would typically move confidence and Irish consumer spending onto an even stronger trajectory.”

Consumers have reacted to the seeping of confidence by bargain-hunting online.

There has long been a move away from traditional bricks and motor shops, but the scale of the move online seems to have speeded up this Christmas.

Much of the online spending is focused on Britain retail operations.

And overall expenditure by householders was down last month, new figures from the Visa spending index shows.

Online spending was up 15.4pc, but the rate of increase eased back.

Spending was up 3.6pc in December when compared with the same month in the previous year, according to the latest data from Visa's Irish Consumer Spending Index, which measures expenditure across all payment types such as cash, cheques and electronic payments.

The rise in December was marginally slow than the increase in the previous month.

Spending has increased continuously through the 28-month series so far, but the latest rise was the slowest since it began in September 2014.

The compilers of the survey found a continued widening of the gap between online and shopping in stores.

Electronic commerce expenditure shop up by 15.4pc in December, compared with the same month a year previously.

Face-to-face spending in shops decreased for the third successive month, but the 0.3pc year-on-year decline was only marginal and better than the November performance.

All sectors, with the exception of clothing and footwear, saw a rise in spending in December.

Country manager for Visa in Ireland Philip Konopik said: “The large shift to online shopping in the run-up to Christmas continued in December with consumers seeking to take advantage of the value on offer from UK online retailers due to the sterling exchange rate.”

Retail Ireland’s David Fitzsimons said stores here were seeing a big shift to buying from UK online operations.

“We have noted a significant increase in online activity and especially with .co.uk websites during a period of sterling deflation.

“This has been borne out by DPD reporting a 30pc increase in parcel deliveries from the UK to Ireland and an 80pc increase by Parcel Motel.”

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