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Online claims a greater share of food and fashion sales in September – while online spending growth slows: ONS and IMRG

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Record proportions of food and clothing sales took place online in September,  compared to the same month last year, the latest official figures suggest. Some 5.8% of all food sales took place online, as did 18.2% of clothing sales, according to the Office for National Statistics’ Retail Sales report for September. Overall, 17.8% of all retail sales took place online last month.

The department store exception

In contrast, department store online sales grew by a relatively slow 8.5%, year-on-year (YOY), and fell by 9.6% compared to August – perhaps hit by the failure of leading department store House of Fraser during August. In August, department store sales were 26.1% up on last year, and in July they were 35% ahead. The retailer was subsequently bought by Sports Direct.

Slow growth in sales

But despite a growing slice of sales taking place online, that slice comes from a relatively slow growth cake. Total retail sales grew relatively slowly in September, and fell when compared with August. ONS figures suggest online sales growth grew by 11%, year-on-year but fell by 2.1% compared to the previous month, while IMRG figures for September suggest they grew by 7.5% – the lowest growth that index has seen since 2014.

Looking at total retail sales, across all channels, ONS figures suggest shoppers spent 4.2% more in September, compared with last September, and bought 3.2% more goods, excluding automotive fuel. But they spent 0.7% less in September than in the previous month of August 2018, and bought 0.8% less goods. Over the three months to September, compared with the previous three months, shoppers spent 1.6% more and bought 1.4% more goods.

ONS head of retail sales Rhian Murphy said: “Retail continued to grow in the three months to September with jewellery shops and online stores seeing particularly strong sales. This was despite a stark slowdown in food sales in September following a bumper summer.”

Commenting on the figures, Philipp Gutzwiller, head of consumer at Lloyds Bank Commercial Banking, said: “After a summer of spending boosted by the long, hot weather, September saw shoppers tighten their belts to catch up. As a result, retailers have had to redouble their efforts, focusing on either steep discounts or creating the theatre that makes going shopping an experience consumers can actually enjoy.

“Both approaches are an attempt to compete with the shift to shopping online, and these figures show that online sales now account for 17.8 per cent of all spending in September.

“The real success stories are either those online specialists delivering sales direct to shoppers’ doors, or the more advanced high street brands that are using tactics like click and collect to deliver shoppers to them.”

A closer look at online sales categories

Focusing online, the ONS analysis estimates that online food sales grew by 10.1% in September, compared to last year, and by 1.6% on the previous month, to account for a record 5.8% of sales in the sector. Textile, clothing and footwear stores reported a YOY 19.9% rise in online sales, and a month-on-month (MOM) rise of 5.3%, with 18.2% of sales in the sector taking place online. At department stores, growth of 8.5% in online sales, year-on-year, and a MOM fall of 9.6%, meant that 16% of total sales in the sector took place online.

Household goods stores saw online retail grow by 25.1% YOY, and 1.9% MOM, to account for 13.1% of all sales in the sector. Non-store retailers – mostly pure plays but also including market stalls and auction houses – saw sales increase by 8% YOY and fall by 4.5% YOY.

Meanwhile, the latest IMRG-Capgemini eRetail Sales report for September 2018 found that online sales grew by 7.5% compared to the same time last year. This, says IMRG, is the lowest September growth since 2014, with clothing (+2.2%) performing well below the five year average for September (+7.4%), while gift sales fell by 23%, YOY – the biggest dip since 2010.

Etail trade association IMRG says online sales faltered after England lost to Croatia and was knocked out of July’s World Cup – and growth fell to a new low for 2018 in September. Over the course of the third quarter, online retail sales grew by 10.1% – down from 17.1% in the second quarter.

Mobile, multichannel and pureplay performance

Sales via smartphones grew by 16.1% in September compared to last September, when sales had grown by 55.8% on the previous year. Tablet sales fell by 22.5% in September; last year they had grown by 8.1%.

Bhavesh Unadkat, principal consultant in retail customer engagement at Capgemini, said that while this month’s performance was the worst of the year, it was building on a strong September 2017, when sales grew by 13%.

He said: “Back to school and new season launches seem to have had less of a draw for consumers despite weather being favourable. The clothing sector saw a dropping online visitation in September, though conversion and basket value increased, suggesting a smaller customer base is driving the sales and customers are shopping on a more needs basis rather than impulse buys.

“Mobile commerce also dropped to a new low of 1.1% in September, following significant decline in the last two months. Multichannel retailers hit a decline of -11.8% vs last year compared to +8.8% in online-only retailers.”

Andy Mulcahy, strategy and insight director at IMRG, said: “The strong second quarter, stimulated by events such as the Royal Wedding, World Cup and heatwave, may have left people with less disposable income in quarter thre. However, beyond that, shopper confidence appears to have fallen at a time when numerous retailers are putting out profit warnings and announcing store closures.”

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