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January online sales well ahead of pre-pandemic 2020, but lower than locked-down last year: BRC

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In January, shoppers continued to make more of their retail purchases online than they did before the Covid-19 pandemic, the latest sales figures suggest. Overall retail spending rose compared to both last January and the one before, while online spending was almost a quarter lower than last year, but higher then in January 2020, today’s BRC-KPMG Retail Sales Monitor figures suggest. And there are warnings of more challenges ahead for retailers.

How shoppers spent across sales channels

Total retail sales grew by 11.9% in January compared to the same time last year – when sales had fallen by 1.3% on the previous year. Retail sales were also ahead by 8.1% on a like-for-like (LFL) basis that strips out the effect of store and business openings and closures – both temporary and permanent.

Total retail sales were 7.5% ahead of the same month in 2020, before the pandemic started.

Spending on food fell by 0.1% in total and by 0.5% LFL in the three months to January. In January alone, sales were down on the same time last year. Over the same period, spending on non-food products grew by 11.1% in total, and by 6.5% LFL. In January alone, non-food sales grew compared to last year.

Helen Dickinson, chief executive of the British Retail Consortium (BRC), says: “It is encouraging to see such strong sales in January, even once inflation has been accounted for. Food sales were more muted than in previous months, as people went back to eating out more often. Consumers prioritised home purchases, boosting the sale of household appliances, electronics and homeware. In what may be signs of a return to pre-pandemic trends, furniture was the stand-out performer in January, after transport delays in the Christmas period began to ease.”

How shoppers bought online in January

Some 41.5% of non-food retail sales took place online in January, according to today’s figures. That’s down from 66.2% in January 2021, but 10.3 percentage points higher than the 31.2% of sales that took place online in January 2020.

Online non-food sales fell by 24.2% in January. A year earlier they had grown by 83%. Compared to January 2020, they were 31.8% ahead of the previous year.

“Unsurprisingly,” says Paul Martin, UK head of retail at KPMG, “online sales were down across all categories compared to January 2021, with items for the home seeing the biggest fall in sales volumes.”

How shoppers spent in-store

In-store spending on non-food products grew 67.6% compared to last year in total, and by 54% LFL. That’s above the 12 month average trend of 51.1% growth.

However, spending in-store was 7.5% lower in total than in January 2020.

Looking ahead

Looking ahead, the BRC’s Dickinson says that: “Retailers and consumers face challenges in the coming months. Retailers face competition from other spending opportunities as the public flood back to restaurants, cafes and live events. Furthermore, rising inflation, driven by higher costs of production, higher energy and transport prices, as well as other looming price hikes this spring will mean consumers will have to tighten their purse strings.”

And KPMG’s Martin says: “With Covid restrictions now eased, and people heading back to workplaces, retailers will be hoping consumer confidence remains robust to help offset the rising cost challenges that they are likely to experience for a while. We could see a challenging few months ahead if wider macroeconomic conditions start to squeeze household incomes to the point that they start cutting back on retail spending. Retailers are facing their own inflationary pressures and will need to take tough decisions on whether and how to pass on the increase costs they have been sitting on for some time to consumers facing their own financial challenges. We could easily see the health of the sector start to deteriorate if consumers choose to sit on savings to weather the storm.”

Susan Barratt, chief executive of grocery analyst the IGD, says that food sales have struggled to match those of January 2021, a year on from a lockdown in which food and drink sales rose quickly. “Following the respite of Christmas celebrations, the new year has brought increased shopper anxiety and IGD’s Shopper Confidence Index reached its lowest level since the index started in 2013. With the cost of living rising at its fastest rate in 30 years, our ShopperVista insight reveals that 89% of shoppers expect food to get more expensive in the year ahead. Coupled with the energy price cap set to rise sharply from April, some 39% of shoppers expect to be worse off financially in the year ahead, up 8% from last month. Therefore, we can expect more shoppers to increasingly focus on tightening their spending in the months ahead.”

Barclaycard figures: essential and non-essential spending

Meanwhile, Barclaycard says that spending on essential items grew by 10.4% in January – the smaller rise for nine months, and largely as a result of slowing spending on fuel during a month in which workers tended to work from home instead of commuting during Plan B Covid-19 restrictions.

Supermarket spending grew by 13.6%. – its smallest rise since before the beginning of the pandemic – as more shoppers opted to buy direct from specialist food and drink retailers including butchers, bakeries and recipe box companies.

Spending on non-essential items grew by 6.1% in January – down from 11.5% in December. Barclaycard says this comes as nearly nine in 10 (89%) UK adults questioned in its monthly consumer survey say they’re concerned about the impact of rising inflation on their household finances, while three in 10 (30%) say they expect increasing household bills to affect the amount they spend on discretionary purchases.

Spending rose on so-called ‘insperiences’ (+50%) as shoppers spent on goods including digital content, subscriptions and takeaways.

Jose Carvalho, head of consumer products at Barclaycard, says: “January’s Covid restrictions, combined with the rise in the cost of living, clearly impacted consumer spending levels in January. While restaurants and bars, pubs & clubs were inevitably hampered by the ongoing pandemic, there are signs of brighter times ahead for hospitality as Brits say they’re planning to spend more on eating and drinking out to lift their spirits during the winter months.

“The lifting of Plan B restrictions should also provide a welcome boost to many sectors, as workers travel back into the office and socialise over post-work drinks, while businesses will likely start to see the benefits of increased inbound tourism on retail sales too.”

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