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Online and department stores see growth in Q2 to July as ONS says overall trend is toward retail growth

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In the three months to July 2019, the quantity bought in retail sales increased by 0.5% when compared with the previous three months, with online accounting for 19.9% of total retailing compared with 18.9% in June 2019, with an overall growth of 12.7% when compared with the same month a year earlier.

It was also a good quarter for department stores, seeing growth for the first time this year with a month-on-month growth of 1.6%; this was following six consecutive months of decline. Food stores and fuel stores logged a decline.

So finds the latest quarterly figures from the Office for National Statistics (ONS), which also reported that year-on-year growth in the quantity bought increased by 3.3% in July 2019, with food stores being the only main sector reporting a fall at negative 0.5%.

This, believes the ONS, shows that the general long-term trend is one of growth. The three-month on three-month growth rate shows that in recent months sales have continued to grow for both the amount spent and the quantity bought, from September 2018 to July 2019.

Non-store retailing has a weight of 10.3% to total retail and, with strong year-on-year and month-on-month growth rates, has contributed the most to the overall growth in July 2019. The month-on-month growth of 6.9% is the largest growth since 9.2% in May 2016. Anecdotal evidence suggests that there were a range of promotions in July 2019 from non-store retailers, which boosted sales.

In contrast, despite its large weight of 38.5%, food stores reported a fall on the year at negative 0.5%, the biggest decline since March 2018. This is compared with a strong growth of 3.6% in July 2018. Food stores were also flat on the month after a small growth of 0.1% reported in June 2019.

Commenting on the results, Philipp Gutzwiller, head of retail at Lloyds Bank Commercial Banking, says: “The retail sector continues to defy expectations and show further growth on the back of a generally positive first half of the year. The falling pound has in no doubt benefitted retailers in the short-term, with more Brits staying at home this summer and potentially spending their increase in real-term wages on fashion and home improvement. However, many businesses – including food retailers – will be wary of the inevitable impact on prices further down the line. We’ve seen both high-end and discounter brands that mix physical and online offers post healthy half-year updates in recent weeks, highlighting that there is plenty of opportunity to prosper for those with the right model.”

Hugh Fletcher, global head of consultancy and innovation at Wunderman Thompson Commerce adds: “While July saw an uptick in sales, the growth of online year-on-year is staggering; now having almost a fifth of the retail market. We expect this figure only to rise over the coming months and years, as 48% of UK consumers have already said they intend to increase their use of digital shopping channels. Shopping trends are clearly shifting and UK consumers are increasingly shunning the high-street in favour of online platforms, which offer the immediacy now expected by shoppers.”

Paul Kirkland, Retail & Hospitality Director at Fujitsu UK agrees: “The latest ONS results show that UK sales have been a mixed bag; while sales have grown in some areas, there has been a serious decline in overall sales year-on-year. What’s clear is that retailers have developed a dependence on calendar dates and in-store sales to bolster revenue, such as last year’s World Cup. The absence of an equivalent event this year means that shoppers are feeling the impact of the UK’s political and economic uncertainty. Retailers must begin viewing their stores as a platform for discovery, engagement, experience, and interaction if they are to achieve sustainable revenue. Modern consumers don’t simply expect to be sold a product, they want their retail experience to give them a sense of belonging and personalisation.”

Kirkland continues: “Technology is providing solutions here; whether it’s using augmented and virtual reality to immerse people in an engaging experience or leveraging predictive analytics to build a responsive and speedy delivery network. Retailers also need to give their store colleagues more autonomy to make better business decisions, in turn enhancing the customer experience. Whether that’s being able to choose a bespoke store stock, ensuring that stock is available via the right channels or better using data to drive personalisation. These investments in technology and in-store expertise will bring consumers back into stores and drive long-term sales. It’s no surprise that the retailers who are continuing to thrive during this difficult period are the ones who are continuing to be customer obsessed and combining a digital technology strategy with putting the colleague first.”

Fletcher agrees: “A shift towards a strong digital strategy is the first step in combatting the decline in the high-street but retailers must increasingly test and embrace innovative technologies such as artificial intelligence, virtual reality changing rooms and Zero UI (the move away from physical interactions in favour of sound, movement and other senses). These are just a few examples of the latest digital trends that will continue to impact and evolve the industry. As consumers shift online, retailers must too embrace the change in shopping habits and feed consumers’ desire for convenient online shopping or face the dark prospect of poor sales, profit slumps and sluggish growth.”

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