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Retail sales flatten in August as shoppers spend less online

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Retail sales growth flattened in August as shoppers spent less online than they had the month before, the latest Government figures suggest.

Today’s ONS Retail Sales report for August 2019 estimated that retail spending – excluding fuel – was flat (+0.0%) compared to July 2019 as shoppers bought 0.3% fewer goods. Online shoppers spent 0.8% less in August than the previous month, while the proportion of retail sales being made online fell to 19.7%, compared to 19.9% in July.

Nonetheless, shoppers still spent more than they did at the same time last year, spending 2.9% more in August to buy 2.2% more goods – excluding automotive fuel – than they did in August last year. They spent 11.6% more online than they did a year earlier.

Non-store retailing – a category that primarily includes online-only pureplay retailers and where 79% of transactions took place online – made the biggest contribution both to the year-on-year rise and the month-on-month fall. 

Looking to the longer-term trend, shoppers spent 3.6% more in the three months to the end of August than at the same time last year, buying 3% more products. And in the most recent three months, compared to the previous three months, they spent 1% more to buy 0.6% more by volume.  

Where shoppers’ spending has changed online…

Ecommerce spending held up when it came to buying food and household goods, but fell for non-food spending, especially in department stores, clothing and footwear, pureplay retailers and in ‘other’ categories. 

Shoppers spent more buying groceries online than they did both last year (+8%) and last month (+5.1%), the ONS figures suggested. They put online spending at 5.8% of all retail sales in the category. Household goods sales were up by 3.5% on the previous month and by 0.4% on last year. They accounted for 14.3% of spending in the category, the ONS estimated.

Textile, clothing and footwear online sales were down on last month (-2.3%) but up on last year (+9.4%), and accounted for 18.8% of spending. Department store ecommerce sales were down both on the previous month (-0.5%) and the previous year (-2.8%) and accounted for 17.9% of all retail sales in the category. Sales at ‘other’ stores, a category that includes electricals, grew (+16.3%) compared to last year but were down (-5.8%) on July. Sales accounted for 11% of the sector.

Non-store retailing – a category that includes pureplays alongside market stalls and auctioneers, and where 79.3% of spending took place online in August – saw ecommerce sales grow by 16.4% on last year and fall by 1.5% on July. The Retail Sales report says that compared to July 2019, “Other stores reported the largest fall of 5.8%, but non-store retailing was the largest contributor to the monthly fall because of its large weight of 50.7%.” But, at the same time, the non-store retailing category reported the largest contribution to spending and the quantity bought in August 2019 compared to the same time last year. 

…and across channels

Across all sales channels, sales of textiles, footwear and clothing grew by 3.8% in August compared to a year earlier, but fell by 0.1% compared to July. Department stores were down both on the previous month (-1.3%) and on the previous year (-2.5%). Households goods sales were up on July (+2%), but down compared to August 2018 (-5.6%). “This decline,” said the ONS report, “ was in comparison to strong growth of 10.8% in August 2018 caused by a combination of good weather aiding garden furniture sales and the World Cup boosting television sales (according to anecdotal evidence of from retailers.” ’Other’ stores were up by 0.2% on last moth and 2.2% on last year, while non-store retailing was down by 3.2% on last month and up by 16% on last year.

Industry comment

Philipp Gutzwiller, head of retail at Lloyds Bank Commercial Banking, said:

“These figures reflect the broader gloom, yet UK retailers are pushing through with relative gusto as they prepare for the busiest trading period of the year.

“Mid-tier retailers may be among the first to feel the extra pinch should the economy show further signs of slowing. In the meantime, many have already adjusted their ranges to narrow choice but protect margins as they seek to cater for evolving demand in the coming months.

“Our own research also indicates that 55% of large retailers have taken steps to reduce the cost of their high street footprints, recognising that shops are increasingly places shoppers go to browse before making purchases online. With this in mind, it’s telling that ‘click and collect’ is the primary footfall driver for 44% of them”.

Andrew Westbrook, RSM’s head of retail said: “The ONS retail sales data for August 2019 show moderate growth at 0.6% as consumer confidence continues to take a hit. This slow growth reflects the current uncertainty on the high street, in parliament and our position within the EU causing a low in consumer and business confidence.

“Last month’s improvement in department store sales has as expected reversed to reflect the long-term distress in this segment, continuing the theme that the margins in pure bricks and mortar stores face extreme cost pressures. The one real surprise in the ONS data is that online sales have also fallen from 19.9% to 19.7%.

“More broadly, following the warnings about food shortages contained in the Yellowhammer report, many food and non-food retailers increased their stock holding in the quarter to deal with the original Brexit deadline of 29 March 2019. As a consequence, we have seen increased discounting across the sector in all categories. This has ultimately led to lower margins and is illustrated by the food stores figures showing a decline of 0.2% for the third consecutive month in the three-month on three-month.”

Image: Fotolia

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