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Online posts lacklustre growth as consumer confidence fails

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Online retailers are sharing the pain of their high street equivalents, relying on discounts and sale events to encourage nervous consumers to spend in the run up to Christmas, the British Retail Consortium said today. Ecommerce sales growth in November hit 8.6%, its weakest since March, while across the retail sector sales fell by 1.6% on a like-for-like basis, the BRC-KPMG Retail Sales Monitor for November 2011 showed.

The growth in non-food, non-store sales, which are predominantly internet sales but also include mail order and telephone sales, compares poorly with the 11.4% average growth seen in this category so far this year, according to the monitor. In 2010, growth averaged more than 16%. Across the UK retail sector retail like-for-like sales, stripping out the effect of store openings and closures, were down by 1.6% and total UK retail sales grew by just 0.7%.

Stephen Robertson, director general of the British Retail Consortium, said: “The growth in non-food non-store sales looks impressive next to the sector’s overall performance but in fact this is its weakest result since Easter and business is growing at half the rate it was this time last year.

“Poor consumer confidence and squeezed disposable incomes are affecting all retail channels. Internet retailers are offering high-profile discounts and holding special one-day events ahead of Christmas in much the same way as high street traders, hoping to generate an uplift in spending.”

He said the single digital market across Europe must become a reality if online retailers were to achieve their potential growth – and that would take pressure on the European Commission from the UK government.

Beyond the online, the BRC said food sales were growing poorly, while non-food sales had fallen and were relying on promotions. Big-ticket homewares and furniture purchases were hit hardest.

Robertson said: “There’s a worrying lack of cheer in these figures. The weakest increase in sales for six months suggests consumers are keeping a tight rein on their spending, despite Christmas being so near.”

He added: “Consumers are not quite in the Christmas mindset yet, although stores are working to generate much-needed sales with high levels of festive discounting.”

Helen Dickinson, head of retail at KPMG, said: “The latest figures prove once more that the health of UK retailing is deteriorating. Christmas is a crucial trading period for the UK retail sector but this year many retailers will be nervous and unsure as to how the season will pan out.

“Cash-strapped consumers continue to be reticent and last week’s gloomy economic forecast by the Chancellor won’t help to boost confidence levels.”

Jon Copestake, retail industry analyst at the Economist Intelligence Unit, argues that slow retail growth is likely to last years, not months. “The BRC figures will come as little surprise to the market or to consumers,” he said. “Perhaps a mild autumn has affected sales, but there is little doubt that the Euro-zone crisis, falling real incomes and fears over the economy are more pressing factors. The Christmas shopping period is set against a bleak backdrop for retailers. Nationwide announced that consumer confidence had hit an all-time-low in October, while the Confederation of British Industry reported steep declines in October and November.

“A pick-up in online shopping and retailers bringing forward sales may offer some festive cheer. However, the underlying weakness remains with slow retail growth likely to last years, not months.”

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