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Online share of UK retail sales fell in June to lowest level since pandemic outbreak: ONS

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Ecommerce accounted for just over a quarter (25.3%) of retail sales in June – the lowest proportion since the Covid-19 pandemic started in March 2020, official figures suggest. The fall came as shoppers reined in on their spending across channels – buying fewer goods from pureplay retailers and less fuel for cars and, but more food and drink around the Jubilee celebrations, according to the ONS Retail Sales report for June 2022. 

Shoppers spent 9.9% less online than a year earlier, and 2.7% less than a month earlier, the report estimates. Across retail channels, shoppers are thought to have spent 1.7% more than last year to buy 5.9% fewer goods, excluding automotive fuel. The rise in spending contrasted with the lower level of purchases is likely to reflect the effect of inflation. UK retail spending was 1.3% higher than the previous month of May 2022, and shoppers bought 0.4% more goods. 

How shoppers spent online

Ecommerce spending in June was 9.9% lower than a year earlier and 2.7% lower than the previous month. It also accounted for 25.3% of UK retail sales – the lowest proportion since March 2020, when 22.8% of sales were online, and continuing a downward trend since the online share of retail sales peaked in February 2021 at 37.4%. 

Online food sales accounted for 8.7% of retail spending in the category, down on both a year earlier (-13.4%) and a month earlier (-1.2%). 

Non-food sales accounted for just over a fifth (21%) of spending, having fallen by 9.4% on last year and 1.8% on the previous month. 

Non-store retailers – mostly pureplay retailers, but also including stalls and markets – saw 85.2% of spending take place online, lower than both a year earlier (-9.1%) and the previous month (-3.8%). 

Clothing, footwear and textile sales continued to have more than a quarter (25.7%) of sales take place via ecommerce. That’s 4.8% down on a year earlier and 2.4% down on the previous month. 

Household goods sales were 23% online, but ecommerce spending fell compared to both a year earlier (-18.6%) and a month earlier (-2.7%). 

Department store sales were 22% online, and lower than a year earlier (-8.7%) but slightly higher than the previous month (+0.7%). 

Some 15.8% of sales in the ‘other’ stores category, which stretch from electricals retailers to bookshops, were online, with spending down both on a year earlier (-7.4%) and on the previous month (-2.1%). 

How shoppers spent across sales channels

Sales volumes fell across retail sales channels, and across many categories, as shoppers spent more to buy fewer goods. Non-food sales volumes were 0.7% down on the previous month, but remain 1.4% above pre-pandemic levels. Food saw growth, probably spurred by the Jubilee celebrations. Shoppers bought 3.1% more food than in May, and 0.3% more than in pre-pandemic February 2020. Volumes rose at supermarkets (+3.1%) at specialist food shops, such as butchers and bakers (+0.8%) and at alcohol and tobacco stores (+3.5%). 

However, clothing store sales volumes fell by 4.7%, month-on-month, in June 2022, while shoppers bought 3.7% fewer household goods. “Feedback from retailers,” says the ONS report, “suggests that consumers are cutting back on spending because of increased prices and affordability concerns.”

Department store volumes were 0.6% lower – and 5.3% lower than pre-pandemic February 2020. However, ‘other’ non-food shops saw sales volumes rise by 4.3%, month-on-month, as sales fo second-hand goods rose, particularly at antiques shops and auction houses. 

Non-store retailing sales were 3.7% down on May 2022, but 20.8% above their February 2020 levels.

Industry reaction

Helen Dickinson, chief executive of the British Retail Consortium, says: “The cost of living crunch caused by record inflation continue to damage consumer confidence and stifle household spending. Discretionary spending and particularly bigger purchases were put off as consumers become increasingly concerned about the future. As a result, furniture sales and white goods were particularly hard hit, while food sales held up a little better.

“Retailers are squeezed between higher costs and weaker demand, resulting in the most challenging trading period since the start of the pandemic. Retailers are playing their part to help households by absorbing as many of these costs as possible, expanding their value ranges, and offering discounts for some vulnerable groups. With the government consultation on the design of the Transitional Relief scheme for the 2023 ending today, there is a clear opportunity to remove some of the burden on retailers that limits their ability to absorb more of the incoming costs.”

Sachin Jangam, partner and CPG, retail & logistics industry lead at Infosys Consulting, says: “Retailers are being impacted hard by inflationary pressure, with sales continuing on a downward trajectory in June. It is clear retailers are stuck between a rock and a hard place – battling price hikes, increased transport and logistics costs, rising labour costs, while at serious risk of losing consumers and market share if they raise prices too high. 

“Food sales volumes may have increased by 3.1%, but this was boosted by the Jubilee weekend celebrations. We’re already seeing major players taking hits on their margins as consumers rein in spending. Retailers can ease this pain by realigning store ranges in line with consumer demand – for example, stocking up on frozen and canned goods that have a longer shelf life, as consumers opt for the cheaper alternatives. Retailers should also be focusing on their price match schemes to stay competitive, whilst negotiating hard with suppliers to keep prices down.

“Fashion retailers need to be even more careful with the right inventory planning, pricing, and promotion strategies as they are particularly vulnerable to risk, owing to seasonality. Right now, it’s the peak of holiday travel season based-demand, but they need to avoid their cash being blocked in the wrong inventory later down the line. All retailers will be battling inflation for the next couple of years. Margins will continue to be squeezed, and while they can’t absorb all the costs of inflation, it’s likely they’ll become more agile when it comes to changing the mix in stores and optimising costs where possible.”

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