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Online sales fall back 7% in July, but still dominate retail landscape, ONS figures show

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Online sales dropped back in July as shoppers returned to the high street, but the strong growth over lockdown means that the sector is still more than 50% ahead of where it was in February.

The latest ONS Retail Sales Index figures show that, across July, retail sales rose by 2% – far out-stripping the 0.2% predicted in June – while online sales, which had been very strong while shops were shut, fell back by 7%. Retail sales in July were also 3% higher than the same time last year, says the ONS.

Online, however, remains very strong still and is far more dominant now than it was pre-pandemic. The shift has already impacted many major retailers, with Debenhams falling into administration for a second time, M&S laying off more than 7000 staff and Sports Direct owner Frasers Group declaring the high street to be “in ruins”.

One reason for the better than expected high street sales is that good weather, lower infection rates and ‘cabin fever’ have seen more people out and about. The rise of staycationing has also helped, while the government’s ‘Eat out to help out’ scheme has also increased real-world footfall.

However, the growth needs to be viewed in context. According to Jon Hudson, UK equities investment manager at Premier Miton, talking to The Evening Standard: “The numbers are encouraging with growth of 3% compared to last July. Consumers are currently relaxed on their personal finances having saved over lockdown and on their likely overseas summer holiday, although this may change when government support pares off over the autumn.”

He warns: “Having spent so much time in it recently, consumers are unsurprisingly spending on their homes while online growth continues to be very strong at the expense of the high street, offering little respite for struggling bricks and mortar retailers.”

This was backed up earlier this week, with research from Kantar showing that 2 million fewer shopping trips have been made to food stores since 24 July when facemasks were made mandatory.

Helen Dickinson, Chief Executive of the British Retail Consortium, also sounds a note of caution. “The latest ONS sales results mask a crisis under way in some parts of the retail industry,” she says. “While food and online have shown growth, the hustle and bustle of shoppers and workers has yet to return to major town and city centres, continuing to impact sales significantly in those locations. In-store non-food sales were down over £1.6 billion per week during lockdown and July’s uplift reported by the ONS doesn’t make up for that lost ground.”

She adds: “The survival of many retail businesses hangs in the balance. Some retailers haven’t been able to pay their rent for the period where they were required to close for our national benefit and numbers of job losses and shop closures are rising. Unless another viable solution is found, the Government should extend the moratorium on aggressive landlord debt enforcement beyond September.”

Aled Patchett, head of retail and consumer goods at Lloyds Bank, adds: “Despite improving sales, the retail sector remains a land of haves and have nots. While many non-essential retailers are returning to strength after lockdown – having been buoyed by spend in categories like homeware – others are living in the shadow of the recession as consumer confidence remains fragile. 

He concludes: “Retailers are acutely aware of the economic threats that potentially widespread redundancies and further lockdowns will pose for them this autumn. With physical stores also continuing to count the cost of low footfall, it’s no surprise to see many retailers already seizing the initiative and proactively accelerating change plans to strengthen areas of their business that will best meet future demand.”

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