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March retail sales plummet as crisis unfolds, but online not as hard hit

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Shopping baskets are not being filled like they were
Shopping baskets are not being filled like they were
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Retail sales dropped by a record margin in March as lockdown took hold, but online fared better, says BRC-KPMG analysis

Perhaps unsurprisingly, overall retail sales in decreased by 4.3%, against a decrease of 1.8% in March 2019 – the worst decline recorded since British Retail Consortium monitor began in January 1995, excluding distortions. It is below the 3-month and 12-month average declines of 1.4% and 0.6% respectively.

 

However, ecommerce fared better. Online non-food sales increased by 18.8% in March, against a growth of 2.5% in March 2019. This is above the 12-month average growth of 4.4%. Non-food online penetration rate increased from 29.3% in March 2019 to 43.5% this March.

 

Sales before and after the lockdown on 23rd March contrasted sharply, the BRC figures show. In the first three weeks of March, retail sales grew 12% on a total basis, but declined 27% in the last two weeks of the period.

 

Over the three months to March, in-store sales of non-food items declined 13.0% on a total and like-for-like basis. This is worse than the 12-month total average decline of 6.1% and comes as a result of the closure of “non-essential” stores.

 

Hugh Fletcher, Global Head of Consultancy and Innovation, Wunderman Thompson Commerce, adds: “The last month was always going to be difficult for retailers, and with consumers holed up in their homes, the balance between physical and online retailing was disrupted almost overnight. Ecommerce has all of a sudden become the only option for many brands and retailers, meaning those businesses that were already prepared for a massive uptick in demand for online purchases were and will be best equipped to ride this rocky wave. Those that were not face the dual challenge of finding a solution for short-term survival, when struggling to find the budget and resource for longer-term digital transformation. For example, Amazon – the best example of a digitally native retailer – has reported that consumers are purchasing $11,000 worth of goods per second, highlighting its ability to cope with high demand and increased traffic in the most unprecedented of circumstances. Its eCommerce capability is supported by its physical infrastructure capabilities too, meaning that it can sell and deliver during this period of lockdown."

 

He adds: “As retailers attempt to weather the storm caused by COVID-19, they are presented with many challenges. Even for supermarkets, the increase in online shopping – which has been made a necessity to many parts of the population – has tested the boundaries of those who are at the top of the eCommerce tree. Yet never has online shopping been so important. Moreover, it is essential as consumers continue to follow social distancing with our research indicating that 62% of UK customers intended to increase their usage of digital shopping channels regardless. Retailers that are able to put measures in place to cope with the spike in demand will find short- and long-term survival much easier. And let’s be clear, this change in the retail landscape, which has super-charged the digital takeup of almost every generation, may very well result in a lasting change to retail in the long-term”

 

Shape of year-on-year percentage changes week-by-week in March (Source: BRC/KPMG)
Shape of year-on-year percentage changes week-by-week in March (Source: BRC/KPMG)

However, across the three months to March, food sales increased 4.9% on a like-for-like basis and 5.1% on a total basis. This is higher than the 12-month total average growth of 2.4%. Over the same three-months to March, non-food retail sales decreased by 6.7% on a like-for-like and 6.6% on a total basis. This is below the 12-month total average decline of 3.0%. For the month of March, Non-Food was in decline year-on-year.

 

Helen Dickinson OBE, Chief Executive, British Retail Consortium comments: “In March, the necessary measures to fight the spread of coronavirus led to the worst decline in retail sales on record. Furthermore, the headline figure masked even more dramatic swings: food and essentials faced an unprecedented surge in demand in the early part of March, only to drop significantly into negative growth after the lockdown and introduction of social distancing in stores. The closure of non-essential shops led to deserted high streets and high double-digit declines in sales which even a rise in online shopping could not compensate for. Sales of computers and accessories, board games, and fitness equipment all rose sharply as a result of the move to home-schooling and work-from-home. In contrast, demand for the latest fashion ranges significantly declined.”

 

She adds: “The crisis continues; the retail industry is at the epicentre and the tremors will be felt for a long while yet. Many physical non-food retailers have been forced to shut down entirely or to limit themselves to online only to protect customers and staff. Consequently, hundreds of thousands of jobs at are risk within these companies and their supply chains. At the same time, supermarkets brace themselves for lower sales, while still spending huge sums on protective measures, donating to food banks and hiring tens of thousands of temporary staff. We welcome the Government’s actions to date, yet millions of livelihoods rely on their continued support.”

Three month average non-food contribution by channel (Source: BRC/KPMG)
Three month average non-food contribution by channel (Source: BRC/KPMG)

Paul Martin, UK Head of Retail, KPMG, says: “Retail sales experienced an historic drop in March, with COVID-19 changing the consumer landscape significantly. Lock down has prompted a fundamental rethink of what is deemed essential. Total sales may ‘only’ be down 4.3%, but the sharp divide between food and non-food, and between physical and online, is far more drastic. Also, the UK’s closure of non-essential stores only started at the backend of the month, so it’s likely worse data is yet to emerge.”

 

Martin continues: “Staying home has seen a surge in sales of food and drink; computing equipment, toys to keep children entertained, and unsurprisingly health-related goods too. Yet our high streets are completely void of footfall, and non-food categories like fashion have been forced into hibernation. With little alternative for non-essential retail on offer, online penetration has soared to 43.5%.”

 

According to Martin: “Non-essential retailers have had to immediately address cash preservation and liquidity, furlough parts of their workforce and understand how to access various government support schemes. Meanwhile, essential retailers have focussed on stabilising their supply chain and product availability, whilst focussing on the safety and welfare of their employees and customers.”

 

He adds: “An uncertain future lies ahead and the industry’s reset button has clearly been pressed. Smart retailers will already be thinking about what this means for the future, but the resilience of the sector cannot be underestimated. Likewise, we cannot overlook the huge contribution many retail workers have made to help the nation during the crisis.”

 

Commenting specifically on the performance of the Food & Drink sector, Susan Barratt, CEO, IGD, says: “UK grocery retailers faced an unprecedented series of challenges in March, and along with suppliers and logistics partners, have been critical to the national response during the Coronavirus (COVID-19) outbreak, ensuring people have access to food and other essentials as well as supporting vulnerable groups in our society. Shoppers are recognising and appreciating these efforts, with trust in the food industry to support local communities up by 4 percent from February.”

 

She concludes: “As well as tackling the immediate challenges of the Coronavirus (COVID-19) impacts, retailers need to have an eye on the future. Our data shows a significant decline in shopper financial confidence, with 39% expecting to be worse off in the year ahead compared to 27% in February, indicating the rest of 2020 may be a bumpy ride for many.”

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