Just over a quarter of UK retail sales took place online in March 2022, as a steady decline from their February 2021 peak continued, official figures suggest today.
The proportion of sales taking place online peaked at 37.1% in February 2021, in the final UK Covid-19 lockdown, but has since fallen steadily, reaching 26% in March 2022, according to the Retail Sales report for the month from the Office for National Statistics (ONS). That’s the lowest proportion since pre-pandemic February 2020, when 22.7% of sales were online.
Online sales fell both compared to last month (-6%) and a year earlier (-21.8%). Shoppers bought fewer goods across all channels as the volume of sales – excluding automotive fuel – fell by 1.1% in March 2022, compared to the previous month, and by 0.6% on the same time last year. But while shoppers bought fewer goods, they spent 6.7% more than they did a year ago to buy them, illustrating the effect of inflation.
At the same time, the latest GfK consumer confidence index figures show consumer confidence dropping by seven points to a “near historic low” of -38 in April – with confidence for the coming 12 months lower than during the financial crisis of 2008 – and there’s evidence, says GfK client strategy director Joe Staton that shoppers are thinking twice about shopping. “This is dire news for consumer confidence,” says Staton, “and with little prospect of any economic relief on the horizon we can only forecast further falls in the index for the year ahead.”
How shoppers spent online
Shoppers spent 6% less online in March than they did than they did the previous month, and 21.8% less than they did a year earlier – in the UK lockdown that ran until late April 2021 for non-essential shops. They spent less online in all categories compared to a year earlier, and less in most categories, compared to a month earlier. Twenty-six per cent of all retail sales were online in March 2022 – with the month continuing a steady decline in the proportion of sales taking place online since it peaked in February 2021 at (37.1%). “Despite the ongoing trend, the proportion of sales made online is still above its level of 19.6% in February 2020 before the coronavirus (Covid-19) pandemic,” says today’s ONS report.
Online food sales were 1.7% higher in March 2022 than the previous month but 20.4% lower than the previous month. Some 9.3% of retail food sales were online in March. That’s well ahead of the proportion of food sales that were online in February 2020 (5.4%), but down from the 11.7% that were online in March 2021.
Across non-food categories, online sales were 2.2% lower than the previous month, and 30.3% down on the previous year. Just over a fifth (20.9%) of non-food retail sales took place online.
The highest proportion of spending that took place online was in the clothing, footwear and textiles category, at 25.9%. Spending in this category was 1% higher than in February 2022, but 15.5% lower than in March 2021.
Just over a fifth (21.4%) of department store sales were online, with ecommerce spending in this category 2.5% lower than the previous month, but 36.1% lower than the previous year.
And a fifth of household goods (20.3%) retail sales were online, with spending 4% higher than in February 2022, but 39.7% lower than in March 2021.
Spending at other stores – a broad category that encompasses retailers selling goods from electricals to jewellery and toys – was 17% online during the month. Spending was 9.6% lower than in February 2022, and 32.6% lower than in March 2021.
Non-store retailers – predominantly pureplays – saw online sales fall by 10.4% compared to the previous month and by 14.8% on the previous year. Some 88.2% of sales in this category took place online.
How shoppers spent across retail sales channels
Shoppers spent 6.7% more in March 2022 than they did a year earlier to buy 0.6% fewer goods – excluding automotive fuel. They spent 0.5% less than in February 2022 to buy 1.1% fewer goods.
Non-store retailing sales across channels saw the sharpest fall – by 7.9% in volume – of the month, having already fallen by 6.9% in February. However, shoppers still bought 20.3% more goods from non-store retailers – which are mostly pureplays but also include market stalls and auctioneers – than they did in pre-pandemic February 2020.
Shoppers bought 1.1% less food in March 2022, following a downward pattern that has continued since November 2021. Factors, says the ONS, are likely to incur higher spending in pubs and restaurants post-Covid-19 restrictions, and the effect of rising food prices on the cost of living.
Non-food sales volumes rose by 1.3% in March 2022, largely driven by growth in the ‘other’(+2.9%) and in household goods (+2.6%) categories.
Commenting on today’s figures, Huw Phillips, head of sales at retail finance plaform Deko, says the fall in non-store retailing, where volumes were down 7.9%, was behind today’s overall fall in retail sales, at the same time as the proportion of online sales continued to decline. But, he adds: “There was a notable jump in non-food store sales, which saw volumes rise by 1.3%. Household goods were up 2.6%, including growth of 4.9% in the sub-sector of DIY and 4.7% in furniture and lighting.
“This suggests that whilst consumers are being more careful with their spending and reducing non-essential purchases elsewhere, they are willing to spend in areas like home improvement that may see larger basket sizes. This is encouraging for retailers and it is vital that they are able to convert these sales. The integration of more payment options at checkout could be a key support to retailers as macro-economic pressures continue to affect the personal finances of customers.”
Melissa Minkow, director, retail strategy at digital transformation consultancy CI&T, says the fall in retail sales is “the tip of the iceberg when it comes to navigating the cost-of-living crisis”. She adds: “Retailers are walking a tight rope between offsetting their own product price increases, rising energy costs and higher shopping rates, and passing these on to the consumer.
“Shrinking the size of goods isn’t a new thing when it comes to managing inflation – but there’s a limit to how far consumers are prepared to be pushed. Something now has to give, and retailers must look for innovative ways they can soften the blow to consumer spending patterns. For clothing retailers in particular, who are bearing the brunt of a cut down on non-essential spending, the provision of rental services offers consumers a happy medium: the chance to indulge in trendiness without paying full price. With sunnier weather on its way and social gatherings that come with this, this is one way retailers can tap into a new market and offset potential losses.”
And Andrew Busby, retail industry lead at software and technology services and solutions business Software AG, says: “Purse strings are being tightened as consumer confidence hits a near-record low, with people navigating higher household bills and fuel costs in the midst of a difficult geopolitical situation.
“After two years of the pandemic, retailers now face a new major challenge – keeping prices down for consumers to remain competitive, while offsetting the impact from rising costs across their own product lines and supply chains. Discount lines may be something we see more of, but it’s not sustainable in the long term. Rather, the customer experience will be more critical than ever for retailers. Consumers are anxious when making purchasing decisions due to the economic headwinds, so creating an effortless experience must be top priority. A key part of this will be keeping up efforts to digitise supply chains – not just for cost efficiencies, but also to build up consumer confidence, which will ultimately help to bolster their purchase decisions.”
Finally, Cornelius Clark of financial services firm Ebury, says: “The headline falls in both the overall volume and the proportion of shopping done online are striking, but the value of ecommerce trading still sits more than 20% above its pre-pandemic level. The boom in online shopping is a structural change and, while the cost of living crisis is providing strong headwinds for all retailers, companies still need to invest in the technology and financial infrastructure needed to provide a high-quality experience for online shoppers to remain competitive.”