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Online shopping levels seem to settle at new normal as hospitality reopens – but shortages could be affecting retail sales

Shoppers may be spending less as their social lives resume. Image: Adobe Stock

Shoppers continued to do more of their shopping online in August than they did before the pandemic, new figures suggests. They spent more online than they did the previous month, but less than they had a year ago, according to the ONS Retail Sales report for August 2021. Across all retail channels, shoppers bought fewer goods compared to both last month and last year – and spent less to do so than in July 2021, but more than in August 2020. That may be connected to shortages – with almost a fifth of department stores experiencing shortages of services, goods or materials, which in turn may be connected to the ongoing lack of HGV drivers. At the same time, department stores experienced the sharpest drop in online sales – both compared to last year and to the previous month, July 2021. 

In August, more than a quarter of spending (27.7%) with UK retailers took place online. Shoppers bought 4.1% less than they did a year earlier, and 1.5% more than they did in the previous month of July 2021. 

Across all channels, shoppers spent 1.4% more than than they did last August to buy 0.9% fewer goods, excluding petrol. They spent 0.6% less than they did in the previous month, July 2021, to buy 1.2% fewer goods.

The slowdown came as 6.5% of retail businesses said, according to the ONS Retail Sales report, they could not get the materials, goods or services they needed. The figure compares with 7.1% across all industries. Among retailers, department stores (18.2%) were most likely to say they were not able to access goods, services or materials, followed by clothing shops (11.1%). Another 8.9% of businesses said they could get the supplies or services they needed within the UK in the last two weeks, but had to change suppliers in order to do so. This was most common among food retailers (22%), fuel business (18.8%) and clothing shops (11.1%). 

How shoppers spent across online categories

Ecommerce continues to see higher spending as a share of total spending. The amount shoppers spent was 4.1% down on last year but 1.5% ahead of July 2021. Some 27.7% of UK retail sales were online in August, up from 27.1% in July.

Ecommerce’s share of retail spending is now lower than it was in peak-pandemic February 2021 (36.5%) but it’s well above pre-pandemic February 2020 (19.7%). Stores are now trading normally, and it seems online may be settling at a higher level. In August, some 10.7% of food sales were online – with sales in the category flat (0.0%) compared to the same time last year, and down by 1.9% on the previous month. 

Almost a quarter of non-food sales were online, where the category declined by 3.3% on last year, and grew by 1.2% on July 2021.

Within non-food, department store sales fell sharply compared to last year (-14.3%) and were also down compared to July (-1.7%). More than a quarter (26.7%) of department store sales took place online. 

Some 29.1% of clothing, footwear and textile sales were online, up by 2.3% on last year, but down by 0.9% on July. And 24% of household goods sales were online, up by 0.3% on last year and by 1.2% on last month. In the ‘other’ stores category – covering everything from sports equipment to computer and telecoms store – 20.9% of sales were online. Spending was down by 3.1% on last year, but up by 5.8% on last month. 

Some 80.2% of non-store retailing sales were online in a category that is mostly made up of pureplay retailers but also includes auctioneers and market stalls. Spending in the category was down by 6.1% on last year but up by 2.9% on the previous year. 

Industry comment

Silvia Rindone, EY UK&I retail partner, says higher levels of socialising with fewer restrictions meant a return to more normal levels spending on retail. “Despite this, sales were generally still strong relative to pre-pandemic levels,” she says. “The proportion of online retail sales rose to 27.7% in August from 27.1% in July, much higher than the 19.7% in February before the pandemic, adding to evidence that this structural change is here to stay and retailers are accelerating their operational set up to match this.

“It is also clear from latest results issued by retailers themselves that some businesses have innovated and thrived despite the tricky environment presented by the pandemic. Some, however, are still struggling and haven’t yet sorted out how they engage customers online and offline. Ultimately, the strongest competitors in the market are those businesses that have nailed down their customer proposition and have accelerated their transformation to take advantage of the structural shifts in the market.

“The main concern for retailers at the moment is not only continuing to accelerate their strategic transformation agendas, but also addressing supply chain issues and driver shortages. These elements are forcing retailers into resilience mode and unless addressed will jeopardise sales during the most important trading period. Over the next few months, the challenge lies with leadership to maintain clarity and focus in order to have a successful peak trading season.”

Melissa Minkow, retail industry lead at CI&T, says: “Retail sales fell by 0.9% in August following a 2.8% dip in July despite the anticipated bump from the back to school season and more workers returning to the office. In part this is due to the toll supply chain difficulties are taking on retailers as they struggle to keep their shelves stocked. An increase in online sales to 27.7%, which is substantially higher than the 19.7% seen in February 2020, also indicated that many shoppers are happy to continue the pandemic trend of online buying. 

“As we enter a busier season for retail, with the holiday shopping on the horizon, retailers must ensure they’re well equipped to manage spikes in demand despite potential shortages and holdups. 

“With the new variant causing concerns, and colder autumn weather on the way, retailers must also be prepared for potential future masking restriction, as well as changes to store capacity. Consumers will seek out retailers who perfect inventory management and omnichannel offerings. Avoiding stockouts and accommodating the new ways consumers are shopping should be top priorities.”

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