A quarter of sales took place online in January, ONS figures suggest today, as the proportion of sales taking place over the internet fell to the lowest level since March 2020. This appears to have come as shoppers spent more in the January sales than in December – continuing to look for bargains as the cost of living continued to rise. The figures also suggest a strong return in-store.
Online, clothing and footwear saw the largest rise in ecommerce spending while household goods and ‘other’ retailers saw the sharpest falls, according to the ONS’ Retail Sales, Great Britain: January 2023 report.
How shoppers spent across channels
Shoppers spent 3.7% more last month than a year earlier to buy 5.3% fewer goods, excluding automotive fuel, the report estimates, as the effect of inflation continued to be felt. But they also spent 0.5% more than they did in December, and bought 0.4% more goods. Sale effect? However, the volume of sales was still 1.4% below pre-Covid 19 levels.
Shoppers bought 0.5% fewer products in food shops in January, having spent 0.7% less in December. The ONS says retailers suggest customers were buying less as food prices and the cost of living rose.
Sales grew (+0.2%) in non-food stores, and by 0.3% (+0.6% by volume) with non-store retailers. Department store sales volumes were up by 0.8% in January from a fall of 3.1%, as “some retailers reported sales starting as early as Christmas Eve and running until the end of January 2023”. Shoppers also bought more household goods (+0.8% by volume) and fewer clothes (-2.9% by volume), the latter following four months of growth.
How shoppers spent online
A quarter of British retail spending (25%) took place online in January, the ONS estimates. That’s down from 25.7% in December 2022. This is still well above pre-pandemic levels; some 19.8% of UK retail sales were in February 2020, ONS figures suggest – but it is the lowest level since March 2020, when 22.3% of sales were online. The proportion of sales taking place online has generally been around 26% in recent months, although it fell both in June 2022 (25.3%) and also a year ago in January 2022 (25.3%). The proportion of sales taking place online peaked in February 2021 at 36.1%.
Shoppers spent 9.2% less online than a year earlier, and 2.1% less than in December, following month-on-month falls across all categories except clothing and non-store retailing.
Food sales were 4.9% down on a year earlier – and 6.1% less than in December. Some 8.3% of UK food sales were online in January.
Non-store retailing, a category primarily made up of online-only retailers but also including market stalls and auctioneers, saw 89% of sales take place online. Spending was 10.3% lower than a year ago, but 2.3% higher than the previous month.
Just over a fifth of non-food retail sales took place 20.3% online. Spending was 9.2% down on the previous year and 6.4% lower than in December.
Some 24.6% of clothing, footwear and textiles sales were online, with spending 3.1% higher than a year earlier and 2.0% higher than in December.
Household goods were 21.2% online, with spending 3.6% down on the previous year and a sharp fall (-21.3%) in online spending compared to December.
‘Other’ retailers, a category that includes electrical retailers, jewellers, toy and bookshops, saw 14.4% of sales take place online. Ecommerce spending was 31.2% lower than a year earlier, and 4.9% down on December.
Analyst reactions
Silvia Rindone, EY UK&I retail lead, says: “Although retail sales volumes marginally increased by 0.5% month-on-month in January, largely due to promotional activity, when looking at the bigger picture, sales volumes fell by 5.7% in the three months to January when compared with the same period last year.
“While not unexpected during what is, traditionally, a quiet trading period, the backdrop of rising inflation and falling consumer confidence means today’s figures are likely to be a sign of things to come. The latest EY ITEM Club Winter Forecast warned that the UK is set for a deeper recession than previously thought with consumer spending likely to fall 1.4% this year followed by growth of 2.3% in 2024.
“Christmas trading updates from retailers over the last few weeks have been varied and reflect a highly pressurised market in which companies are competing for the same share of squeezed wallets amid rising costs and overheads. These headwinds are having a real impact on bottom lines as the findings of EY-Parthenon’s Profit Warnings analysis for 2022 found. FTSE Retailers issued the highest number of warnings of any sector during the year, with almost half (48%) issuing a warning in 2022.
“With consumers likely to continue tightening household budgets in 2023, it will be critical for companies to keep adapting and reflecting customer priorities, which for most consumers in the short-term will be a compelling price proposition.”
Thomas Pugh, economist at RSM UK, says: ‘The slight rebound in retail sales in January probably represents a better start to the year than many had expected. But the relatively mild weather in January will have helped. What’s more, consumers’ real incomes are likely to take a further hit over the next six months as inflation remains significantly higher than wages, more households are forced to remortage at much higher rates and some government support is withdrawn. As such, we suspect retail sales will resume their downward trend in the first half of this year.
“However, there is light at the end of the tunnel. The recession should be relatively short and mild and consumer spending should begin to pick back up in the second half of this year. So, retail sales should start to rebound later this year.”
