Shoppers spent less online in the Christmas month of December than they did in November, with just over a quarter of sales taking place via ecommerce, the latest official figures suggest. A combination of earlier pre-Christmas discounting, Royal Mail strikes that continued into December and a general reluctance to spend in a cost-of-living crisis appear to have hit online sales as ecommerce spending fell both compared to a year earlier (-8.9%) and to the previous month (-2.9%).
There was a standout month online for household goods retailers (+16%), with spending on items such as furniture growing ahead of inflation, but sales of toys, electricals, and cosmetics fell by almost a quarter among retailers selling in the ‘other’ retail category, according to the ONS Retail Sales report for December 2022.
Across channels, shoppers spent less in December than they did in November, and they spent more than they did a year earlier to buy fewer goods. There was evidence of shoppers going back in-store amid concerns about online deliveries.
How shoppers bought online
Shoppers spent 8.9% less online than a year earlier, and 2.9% less than the previous month. Some 25.4% of sales took place online. The ONS says that retailer feedback suggests shoppers bought in-store more than previously because of the Royal Mail strikes, which caused uncertainty about pre-Christmas delivery dates. “Despite this fall,” says the ONS report, “the proportion of retail sales taking place online remains above the pre-coronavirus (Covid-19) pandemic levels (19.8% in February 2020).”
Online food sales fell by 12.2% on the previous year, and were flat compared to November 2022. They accounted for 9% of sales in the category.
Non-food ecommerce sales were 2.4% higher in December than a year earlier, but 4.3% lower than in November 2022.
Household goods retailers had a standout online performance, as shoppers spent 16% more than they had a year earlier, and 14.5% more than in November 2022. Some 25.9% of retail sales in the category were online during the month – making this the multichannel category with the highest proportion of online sales.
In contrast, ’other’ stores – a category that ranges from electricals retailers to jewellers, toyshops and booksellers – saw the largest fall in online sales, down by 23.8% year-on-year (YOY), and by 13.6% month-on-month (MOM). Sales in this category were 15.2% online, suggesting that shoppers had, to a limited extent, returned in-store to buy these items. In November 2022, 16.1% of ‘other’ category sales took place online – and 16.5% were online in October 2022.
In the non-store retailing category, which is dominated by pureplay retailers, sales were 11.2% down on a year earlier, and 4.8% down on the previous month. Some 87.3% of sales in the category were online. That’s lower than in November 2022, when 91.4% of sales were online.
Department stores saw a year-on-year increase in online spending (+2.4%), although spending was lower than in November (-4.3%). Some 23.7% of department store sales took place online.
Textile, clothing and footwear sales were 2.6% lower than a year earlier, and 0.2% lower than the previous month. Some 23.4% of sales in the category took place online.
How shoppers spent across channels
Across sales channels, shoppers spent 3.3% more than they did a year earlier to buy 6.1% fewer goods, excluding automotive fuel. They also spent 1% less than the previous month, of November 2022, to buy 1.1% fewer goods.
Spending in non-food stores was 0.8% down on last year. Shoppers bought 2.1% fewer goods than in November 2022, particularly in department stores (-3.1%), non-store retailers (-6.2%) – where there were strong falls in spending on cosmetics, sports equipment, games, toys, watches and jewellery. However clothing retailers saw volumes rise by 1% in December 2022, and household goods stores, such as furniture retailers, saw sales volumes rise by 1.5% during the month.
Feedback from retailers was that “consumers are cutting back on spending because of increased prices and affordability concerns,” says the ONS report. Its own research into public opinion and social trends found that in the period from December 7 to 18, 60% of shoppers were cutting back on spending, primarily by buying fewer presents (79%) and by spending less on those presents (73%). That continued into later research, covering the period from December 21 to January 8.
Shoppers bought 0.3% less food in December compared to November, when sales had risen by 1%, and 0.1% less than in December 2021. “Feedback from some retailers suggested that the November increase was because of customers stocking up early for Christmas,” says the ONS report, which adds that shoppers have steadily bought less food, by volume, ever since Covid-19 restrictions on hospitality were lifted in the summer of 2021.
Analyst comment
David Jinks, head of consumer research for ParcelHero, says: “Strikes in the traditional mail sector meant retailers and individuals switched to alternative couriers, and this unexpected extra volume of parcels took some courier networks by surprise. Heavy snow in early December also delayed deliveries. The upshot of this was that shoppers abandoned online in favour of the High Street to be sure they had gifts for the big day. Online sales’ slice of the overall retail cake fell to 25.4%. By contrast, in December 2021, it took 26.6% of the entire retail market.
“Retailers will be looking for more encouraging numbers in January as inflation begins to slow. Online sellers will also be concentrating on improving the quality of their service, from their website user experience to final mile deliveries.”
Tobias Buxhoidt, founder and CEO of parcelLab, says: “Looking back across the recent Christmas period there has been no letup in terms of consumer demands for a seamless and flexible shopping experience. Customers want speed, choice, and transparent post-purchase processes, which retailers must get right if they are going to navigate the changing demands of today’s economy.
“Industrial action may lead to delivery delays and inflation may reduce our overall willingness to spend, yet it is up to brands to curate positive experiences that drive the loyalty. A key aspect of this will come down to keeping shoppers well-informed at every stage of the order and returns process.”
Sachin Jangam, partner for retail at Infosys Consulting, says: “Despite starting a new year, the ghosts of retail results past and present are still haunting stores. While the UK economy grew by 0.1% in November due to seasonal shopping boosts and the World Cup, retail sales fell by 1% in December as consumers quickly revert back to their ‘normal’ shopping habits as the cost-of-living crisis continues. Margins will continue to be squeezed in 2023, and while retailers can’t absorb all the inflationary costs, they can become more agile.”
Hugh Fletcher, global marketing director and thought leadership lead at Wunderman Thompson Commerce, says: “Despite November’s better-than-expected results, December’s dip in sales comes despite the busy Christmas and sales period. This will no doubt come as a disappointment for retailers hoping for a reprieve after a difficult year. It underlines the magnitude of the challenges that businesses will be up against in 2023, and it’s essential that they prepare proactively and swiftly.
“So what next for businesses facing a worrying 2023? Implementing an omnichannel strategy will be as important as ever, and businesses that can seamlessly incorporate marketplaces, physical stores, brand sites and social commerce into their offerings will see the biggest dividends. Another differentiating factor going forward will be service. While price plays a key role in decision-making, the service being offered by retailers when it comes to availability, deliveries and returns is becoming increasingly important, and in many cases more so than the retailer being shopped from, or the brand being bought.
“While November’s figures showed that sales and discounts continue to be effective, December’s figures underline that there is a limit to consumer spending. So businesses need to strike a balance between offering customers great value without compromising wider sales goals. Retailers must also be aware of the sting in the tail of returns: with 24% of everything ordered online being returned, figures for January may be impacted even more.
“And it’s likely that retailers will be fighting for a share of a decreasing amount of spend, certainly in Q1. Those retailers that fail to offer consumers an omnichannel and seamless shopping experience – at the right price – alongside the service that consumers are now demanding, will quickly be left behind by competitors.”
