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Online sales growth weakens as customers cut back

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Online sales growth weakened in October as consumer spending power came under pressure, the British Retail Consortium (BRC) said today.

While the popularity of basic internet shopping continues to grow, the amount shoppers are spending online is not growing as quickly as it as, the BRC said as it released its latest retail sales figures, showing the UK’s non-food, non-store sales, principally derived from internet retailing, grew by 11.5% in October, compared to the previous year.

That’s stronger than the 10.1% recorded in September but less than the 12.8% gain made in October 2010.

At the same time, overall UK retail spending grew by 1.5% in total this October, said the BRC-KPMG Retail Sales Monitor for the month, compared to last, but fell by 0.6% on a like-for-like basis, when the effect of store openings and closures was stripped out.

BRC director general Stephen Robertson said: “Online sales growth is up on September and still beating store sales performance by a wide margin, but mounting pressure on customers’ disposable incomes has noticeably weakened the underlying pace of that growth.”

He said that in the 12 months to October non-food, non-store shopping, which includes mail order and telephone sales as well as online, grew by an average of 12.1% a month. In the previous 12 months, growth was in the order of 17.2%.

Robertson added: “The basic expansion of internet shopping continues but sales values are not rising as quickly as they were because customers don’t have money available and, even where they do, are less likely to buy goods that aren’t on special offer.”

Across retail, sales slowed in both food and non-food, especially in big ticket items.

Robertson said: “Which part of the wave we’re riding varies from month to month but the water is consistently chilly. For a fifth month, total sales growth continues its strangely regular flip-flopping between 2.5 and 1.5 per cent. But, the year-to-date figure, which smooths out these minor moves, is unchanged from the previous month. This is evidence of the basic weakness of consumer confidence and demand and worrying this close to Christmas.

“Underneath the headline figure, the year-to-date results show almost no growth in non-food sales. Allowing for the VAT rise since last year, that suggests a substantial drop in sales volumes while the food figures indicate very little volume growth. It’s clear customers are cutting back whatever they’re buying.”

Helen Dickinson, head of retail at KPMG, said: “With so much uncertainty across European and global markets, UK consumers remain reticent as their personal finances become harder to manage.”

She added: “The success of the Christmas season for retailers hangs in the balance as October’s results do not set a strong foundation.”

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