Irish high street suffers as online spending climbs

An 18.1% jump in ecommerce spending last month, while face-to-face shopping continues to decline...

A significant boost in online shopping helped drive Irish consumer spending last month, according to the latest data from Visa.

Its Irish Consumer Spending Index, which measures expenditure across all payment types and is compiled by Markit, saw a 4.3% year-on-year increase in March.

While it represented solid expansion, Visa noted that it was slower than average growth since the series began in September 2014. For the first quarter of 2017 as a whole, spending was up 2.5% year-on-year.

Ecommerce spending, meanwhile, "accelerated sharply" to 18.1% year-on-year, its strongest growth in four months.

In contrast, face-to-face shopping suffered a decline for the sixth successive month. The annual rate of contraction eased to -2.4%, though it was still the third-largest decline in the 31-month series history.

A Virgin Media report released in September 2016 forecast that the value of Ireland's online spending will double by 2021 to €14.1bn. Some 94% of internet users now shop online, and the average amount those people are shelling out has risen 13% in just two years. 

About 60% of Irish online spend goes abroad. That could account for as much as €8.5bn by 2021 if that trend continues. Overall, the digital economy is worth €16 billion, which is 6% of Ireland’s GDP.

Returning to Visa's new data, transport & communication remained the strongest performer on a sectoral basis, seeing growth in spending quicken to a four-month high of 12.0% year-on-year.

Four of the eight monitored sectors posted a return to growth in March following declines in February. A particularly strong rebound was seen in recreation & culture, where spending was up 7.5% on the year, the strongest rise since November last year.

Food & drink expenditure rose modestly on an annual basis in March (1.4%). Spending growth has now been recorded in the sector in three of the past four months.

Two categories continued to record declines in expenditure, namely clothing & footwear and hotels, restaurants & bars. The former posted the sharper reduction, seeing a fall in spending for the seventh time in the past eight months.

Consumers spent less (-1.0%) in the hotels, restaurants & bars category for the second month running, with the rate of decline only slightly slower than the Leap Day-affected reading from the previous month.

Visa's Irish country manager Philip Konopik said:

“Irish consumer spending continues to rise, albeit at a reduced pace, with March recording the sixth month in a row where the rate of growth was less than five percent. While this is positive, there is cause for concern in two areas.

"Face-to-face spending has been in decline for the past six months and the clothing & footwear sector is particularly challenged. The ongoing bus strike has impacted regional businesses and it could hold face-to-face spending back.”

Andrew Harker, senior economist at IHS Markit, added:

“As expected, consumer spending rebounded in March following the Leap Day-related fall in February, with the expansion broadly in line with those seen around the turn of the year.

"However, the first quarter as a whole saw the rate of growth ease from the end of 2016 as consumer confidence remained muted. There is still little sign of a recovery on the high street, with Face-to-Face spending now in a protracted downturn, and so eCommerce is having to drive growth at present.”