July was a month of two halves for online retail, with a strong first half and a slow second half, according to the latest BDO High Street Sales Tracker data.
Overall, retail sales grew by 2.7% year-on-year in July, indicating sales volumes rose very slightly when adjusted for inflation. In-store sales grew by +3.8% in July – the best performance on the high street since January – but was primarily driven by a strong start to the month, as growth flatlined to just +0.09% in the final week of July.
Online sales started strongly but dipped into negative territory in the final week of July with -0.07% like-for-like sales.
BDO’s data comes hot on the heels of ONS figures showing that online sales performed particularly strongly in June, with an increase of 14.4% year on year, highlighting the sheer volatility of the current retail environment.
Sophie Michael, head of retail and wholesale at BDO, pointed to the World Cup and the heatwave as reasons why July started so strongly before dropping off, but said that “retailers may have been taken aback at just how steep the decline in sales has been over the past couple of weeks.”
She suggested that shoppers may already have bought what they needed for the hot weather. “The spell of unusually warm weather earlier in the summer is likely to have encouraged many consumers to refresh their wardrobes sooner than they normally would, leaving less demand later in the season; hence the stronger numbers we saw in May,” she said. “At the same time, ongoing economic uncertainty, including concerns over interest rates and energy costs, continues to weigh on consumer confidence and discretionary spending.”
Government change adding to consumer caution
The new Prime Minister may also have had an impact. “Added to this is the backdrop of political uncertainty, with consumers and businesses awaiting the Chancellor’s first budget and the potential impact of any fiscal changes,” Michael said. “It is therefore understandable that many households are taking a more cautious approach to spending on non-essential items.”
She also suggested that the rebooted Government could step in and offer more support to retailers. “One of Burnham’s first announcements in government was a business rates cut to support hospitality, and retailers may be questioning when similar measures will be introduced for a sector that employs more people than any other part of the private economy,” she said.
Challenging months ahead
The upshot, however, is that the trading environment – after a very brief hiatus – once again looks challenging for retailers. “Against this backdrop, retailers will have to be highly strategic about how they manage their inventory levels and generate vital cashflow, whilst responding to changing consumer demand ahead of the crucial festive period,” Michael said. “After a very inconsistent first half of the year, the coming months are likely to prove decisive in determining the health of the UK’s retail sector.”
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