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Online sales grow at record levels in January – but overall retail sales fall to lowest level since last May: BRC/Barclaycard

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Online sales grew at record levels in January, as shops closed in a third coronavirus lockdown and overall retail sales fell to the lowest levels since last May, according to the latest figures from the British Retail Consortium. 

Meanwhile, Barclaycard figures suggest that overall consumer spending fell by 16.3% year-on-year in January – the sharpest decline, again, since last May.

Record rise in online spending

Almost two-thirds (63.6%) of non-food sales took place online during the month, according to the BRC/KPMG Retail Sales Monitor for January 2021. That was up from 31.2% a year earlier, and came as online sales in the category grew by a record 83%. A year earlier, online sales grew by 1% on the previous year. 

This January’s figure came in the third period of coronavirus lockdowns since the pandemic was declared last March – and was higher both than the three-month average of 57.3%, and the 12-month average of 43.1%.

At the same time, January figures from Barclaycard, drawn from its card processing business, found that online spending was 73.2% ahead of last year, and that 54.9% of all retail spending took place online in January. 

But UK retail sales fall

But the sharp rise in ecommerce sales came as UK retail sales across all channels fell in January for the first time since the spring, as shops closed in a third lockdown and the traditional January sales were pushed online, according to the BRC and KPMG. Total sales fell by 1.3% in January, compared to the same time last year, when they had fallen by 0.4%. Sales increased by 7.1% on a like-for-like basis that strips out the effect of store openings and closures. 

Food sales, meanwhile, grew by 7.9% in total and 7.5% LFL over the same period. 

Helen Dickinson, chief executive of the British Retail Consortium, says: “January saw retail sales growth decline to its lowest level since May of last year. The current lockdown has hit non-essential retailers harder than in November, with the new variant hampering consumer confidence and leading customers to hold back on spending – especially on clothing and footwear. 

“Meanwhile, retailers have worked incredibly hard to expand their online delivery and click and collect offerings to ensure everyone can get the products they need during lockdown. This has led to record growth for online non-food sales and is a testament to the resilience and innovation of retail, which in the face of the pandemic, has rapidly adapted and invested in online platforms and delivery logistics.

Spending on food

Barclaycard figures found that spending on essential items grew by 3.9% in January compared to the same time last year. Online supermarket spending grew by 126.8%, and still faster among the over 65s (+332.5%), at a time when older and more vulnerable people are relying more heavily on buying online. Barclaycard’s consumer attitudes survey of 2,000 people found that 57% would rather visit a supermarket in person in order to avoid taking a slot from someone who needs it.  Online food and drink specialist retailers – including those supplying weekly recipe boxes – saw their sales grow by 92.1%. 

BRC figures, meanwhile, found that food sales grew by 7.9% in total and 7.5% LFL in the three months to January, compared to the same time last year.

Susan Barratt, chief executive of grocery analyst the IGD, says sales followed a traditional January drop following high levels of sales seen in December. “The latest national lockdown triggered a small spike in sales at the start of the month, but this was much more modest than the surge experienced in the first lockdown in March. Many categories continue to benefit from the closure of the out-of-home sector. Alcohol sales have fared particularly well, with ‘dry January’ having little impact on consumers’ spending.”

She says that IGD’s Shopper Confidence Index improved in January to the highest level since last February, likely to be as a result of the vaccination programme, and mostly affecting the 55s and over. But, adds Barratt: “While boosted in the short-term, confidence is likely to remain fragile as shoppers feel the impact of the economic downturn. Any supply chain disruption due to the new trade deal with the EU could also have an impact on shoppers.”

Spending on other goods

BRC figures also found that in the three months to January, in-store sales of non-food goods fell by 36.5% in total, and by 19.8% like-for-like. That’s behind the 12-month total average decline of 28.3%.

Paul Martin, UK head of retail at KPMG, says: “For the first time since last spring, we saw total monthly sales decline and even the on-going demand for groceries and home-related categories was not enough to halt the fall. Although online channels continued to experience historic growth with more than 60% of all non-food sales transacted online, the lockdown meant that the traditional January sales period did not really materialise for the rest of the retail sector, with just a handful of categories recording any growth.

“Computing was the hot category and saw triple figure growth online as schools closed and parents rushed to purchase laptops and printers. Meanwhile, clothing retailers continued to struggle, with physical sales down across all categories.”

Barclaycard found that spending on non-essentials was down by 24.2% on last year in January, with shops selling these goods most likely to be closed. Spending was most sharply down at department stores (-36.8%), pharmacies and health and beauty shops (-27.2%) and clothes shops (-25%). Barclaycard’s parallel consumer research survey found that only 40% of Britons felt secure in their jobs – down 10% since last January and the lowest level for more than a year. Despite these overall falls, online spending was 73.2% ahead of last year, and 54.9% of all spending took place online in January, with particularly high ecommerce sales at specialist retailers (+87.7%), a category that includes  those selling stationery, sports and outdoor equipment – perhaps to parents of children now learning from home.  

Raheel Ahmed, head of consumer products at Barclaycard, says some sectors have struggled as shops have closed, while hope for the travel sector seems to have stalled in the face of tougher border controls. 

“Yet, on a more positive note,” he says, “we have seen a surge in many online categories as the demand for home deliveries continues to rise. From meal kits and subscription services, to online grocery shopping, Brits have continued habits they formed in the first lockdown, with a record high seen in spending on takeaways and fast food.

“While confidence in job security has reached its lowest point in over a year, the ongoing vaccine rollout means that Brits believe there is hope on the horizon, and we all look forward to being reunited with much-missed family and friends later in the year.”

The BRC is calling for business rates relief to be extended beyond March. “Three periods of prolonged closure for some and the ongoing uncertainty around reopening puts many retailers in a precarious position,” says Dickinson. “If Government wants to avoid further administrations of otherwise viable businesses and thousands of jobs losses, it must provide those firms which have been hardest hit with the necessary financial support, including targeted business rates relief beyond March.” 

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