Sales online rose by 4.8% in July, compared to June, according to official figures but total retail sales over a three month period continue to decline. Online now accounts for 26.3% of total retail sales in the UK, according to the ONS Retail Sales report for July 2022. This puts online almost seven percentage points up on February 2020’s pre-pandemic position of accounting for 19.8% of retail sales. Ecommerce sales peaked in February 2021 when online accounted for 37.5% of sales.
The ONS suggests that July’s online spend was boosted by a range of retail promotions.
The rise in online sales follows a 3.7% decline in sales online in June when ecommerce accounted for just over a quarter (25.3%) of retail sales – the lowest proportion since the Covid-19 pandemic started in March 2020,
Overall, retail sales rose slightly in July (0.3%) compared to June 2022 but a three month view shows sales declining. The three months to July 2022 show a fall of 1.2% when compared to the previous three months, continuing the downward trend seen since last summer. Sales volumes are still 2.3% higher than February 2020’s pre-pandemic levels
What consumers bought
Food sales volumes rose by 0.1% in July, remaining 0.1% below February 2020’s level, while fuel sales fell by 0.9%. Anecdotal evidence suggests that the heatwave across parts of the UK may have reduced travel and sales. Fuel prices in July reached record highs increasing the gap between sales volume and value.
Grocery retailing has seen a decline in sales overall since the summer of 2021 as consumers return to eating away from home. Food prices and the cost of living also impact grocery sales.
Sales volumes in non-food stores fell as well, declining by 0.7% over the month, but remaining slightly above pre-pandemic levels, albeit at just 0.4% higher. ‘Other non-food stores,’ which includes second-hand goods retailers, saw the greatest decline (1.5%). Clothing sales dropped 1.2%. This follows a drop of 3.9% in June 2022.
Retailers selling household goods, such as furniture and lighting, are seeing sales decline as consumers cut back on spending because of price rises and concerns about affordability. Sales volumes in these stores fell by 0.4% in July.
However, department store sales volumes rose by 1.4%. They remain 4% below February 2020 levels.
Industry reaction
Maxim Syn, head of desk at global financial services firm Ebury, commented: “Today’s retail sales data show that online sales in July offered retailers some light relief amidst plummeting consumer confidence. But the economic storm-clouds are gathering as we head towards winter and despite the positive figures, retailers still face a rocky end to the year. With the Bank of England forecasting a recession to last for over a year in the midst of soaring inflation, the sector faces an incredibly challenging climate.
“Ecommerce will be an area to watch during the likely recession. The hunt for value is likely to continue to send shoppers online but likely cutbacks to discretionary spending through winter could limit sectors like clothing, electrical items and bigger-ticket purchases like holidays.”
David Jinks, head of consumer research at ParcelHero, points out: “The real fly in the ointment is inflation. The ONS’ retail sales values are unadjusted for price changes. So, while it’s true that we bought more and spent more in July, a chunk of that extra spending is the impact of rising prices. The ONS says, looking at the figures overall, there is an implied annual growth in prices of 10.4%.”
Richard Lim, CEO, Retail Economics says: “The amount of spare cash families have left after paying for essentials is evaporating fast. So, while sweltering temperatures boosted demand for summer clothes and supported sales of beauty products, it feels like this is the last hurrah before the impact of rising interest rates and rocketing inflation chokes spending further.
“Cutting back on ‘nice-to-haves’, trading down to cheaper alternatives and delaying non-essential spending are all coming into play as a more cost-conscious consumer emerges. Sales volumes declined across both food and non-food compared with the previous year, as consumers tighten their belts.
“The outlook is as tough as I can recall. Inflation is still yet to peak, and the impact of rising interest rates takes time to trickle through to households. Consumer confidence has hit an all-time low and even those that do have cash to spend will be more inclined to bolster their rainy-day fund given such an uncertain outlook”.
