The common assumption in recent years has been that online sales are growing at the expense of the high street, and leading to store closures. But new analysis from the Office for National Statistics, published today, suggests what’s really happening is that, regardless of the story at individual retailers, overall online sales are growing fast – and store sales are growing too.
The ONS analysis focuses on how store sales compared with online sales in 2017 and what that means for retailers. It found that during the course of last year, shoppers spent about £366bn on retail sales, 4.7% up on the previous year. During 2017, online-only sales grew by 15.9% to reach £59.8bn, while store sales were 2.3% ahead at £306bn. However, it finds, shoppers still spent most of their money (82%) in stores, and most online spending took place not at multichannel retailers websites, but with retailers that have no stores. These are mostly pureplay retailers, but also include market traders and auctions, among others.
Put simply, the growth in online spending isn’t coming at a cost to stores, it’s coming as the pureplay retail sector expands, fast. The only sector where store sales fell between 2008 and 2017, according to the ONS, is in household goods stores, where sales fell by 0.1%.
That said, the ONS report now detects the beginnings of a change in customer behaviour as shoppers start to shift online.
It said: "Online sales have shown a steady increase since 2008 but have really set off in the last three years, as online spending increased at a faster rate from 2015. This has coincided with a slight slowdown in store spending, which shows the beginning of a shift in consumer behaviour to spending more online."
It concludes: "Whilst online sales are growing at a fast rate, bricks and mortar sales still account for nearly 82% of sales. Online spending has increased at a fast rate whilst spending within stores has remained relatively stable. These changes in spending habits mean consumers are now buying more online than ever before. As would be expected, the largest increase in online spending over the past decade is within non-store retailing."
The report came as the ONS published its monthly figures showing a record proportion of retail sales taking place online in August, while department store business also continued to expand online the internet, according to new figures.
The Office for National Statistics (ONS) Retail Sales report for the month suggests that 18.2% of retail sales took place online in August, as did 18.4% of department store sales - a new high for the category.
Those record proportions came in a month that online sales grew by 14.2% compared to the same month last year, and by 0.7% compared to the previous month of July.
Looking at retail sales across all channels - including stores, where most sales take place, shoppers spent 4.8% more in August than they did the previous year to buy 3.5% more goods (excluding automotive fuel). Compared to the previous month, they spent 0.6% more to buy 0.3% more goods.
“Retail sales remained strong in the three months to August, with continued growth across all sectors," said ONS senior statistician, Rhian Murphy. "Food and household goods stores particularly benefitted from the warm weather when compared with last summer.
“The figures for the month of August were a little more mixed, with food sales falling after strong sales earlier in the summer and clothing sales declining following a strong July, as suggested by clothing retailers. On the other hand, household goods grew strongly.”
Looking at how different categories performed online, food sales were 5.5% up on last year, but 0.2% down on last month, and accounted for 5.5% of all retail spending on groceries. Department store ecommerce sales grew by 26.1% on last year (+1.5% on the previous month) to account for 18.4% of spending in the category, while sales at textiles, clothing and food stores were 10.4% up on last year but 1.4% down on July, and accounted for 17.2% of sales in the category.
Household goods stores showed fast growth of 27.3% in ecommerce sales - 10.2% up on last year - to reach 13.1% of all sales in the category. Retailers without stores - mostly pureplay retailers, but also including market stalls and auctions – saw sales grow by 14.4% to reach 78% of spending in that category.
Commenting on the August figures, Rachel Lund, head of retail insight and analytics at the British Retail Consortium (BRC), said: "While beating expectations, August’s figures show signs of retail sales losing a bit of the steam gathered over the long hot summer. Spending online and on food remained strong but could not match the World Cup and sun-fuelled demand earlier in July."
Philipp Gutzwiller, head of consumer at Lloyds Bank Commercial Banking, said: “There’s no hiding from the headwinds on the high street, however the star performers remain the pure online players, which continue to find ways of boosting sales even when family spending is being squeezed by rising interest rates and food prices.
“The hope now is that recent good news about rising real wages and record employment levels could be followed by a degree of political and economic certainty in the coming months, and that shoppers – and perhaps even retailers themselves - will begin feeling like they have turned a corner.”