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Shoppers spent more online but reined in spending across channels in September: ONS

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Shoppers spent more online in September than they did the previous month, the latest official retail figures suggest. Across all sales channels, they spent more than last year but less than the previous month to buy fewer goods as the effects of inflation continued to be felt. Analysts are now looking to Black Friday for a seasonal spending boost.

The proportion of sales taking place online remained “broadly consistent” at 26.4% – following a trend that has persisted since May. That may suggest ecommerce spending has now settled at a new post-pandemic level – higher than the 19.6% of sales that took place online in February 2020, but lower than pandemic peaks.

“The value of online spending rose while retail sales as a whole fell, so the proportion of online sales increased slightly to 26.4% from 26.0% in August 2022,” says today’s ONS Retail Sales report for September 2022. “The proportion of retail sales online has remained broadly consistent at around 26% since May 2022.”

The ONS Retail Sales report for September 2022 found that sales were 1.3% lower than they were before Covid-19 hit. Many shops closed for a day on September 19 for the funeral of Queen Elizabeth and this may have a dampening effect on in-store sales for the month. Road fuel sales were “significantly reduced” on the bank holiday of the funeral, according to the Department for Business, Energy and Industrial Strategy – while retail sales may also have been pushed online.

In September, shoppers spent 3.3% more across all retail channels than they did a year earlier to buy 6.2% fewer goods, excluding automotive fuel – reflecting the effect of inflation. And they spent 0.4% less than the previous month to buy 1.5% fewer goods. Including automotive fuel, they spent 1.4% less than the previous month to buy 1.4% fewer goods.

How shoppers spent online

Online sales for the month were 8.2% lower than a year earlier, and 1.2% higher than the previous month of August. Compared to last month, internet spending was higher in every category except household goods. 

Ecommerce food sales were 11.1% lower than last year, but 0.5% higher than last month, and 8.9% of food sales took place online. 

Non-food sales, of which 21.8% were online, fell by 7.1% on last year, but were 1.5% up on the previous month. Clothing, footwear and textiles continued to be the category that is most online, with 25.8% of retail sales taking place over the internet. Spending was 5.8% lower than last year, but 0.4% higher than a year earlier. 

Some 23.1% of department store sales were online. That’s 3.5% down on a year earlier, but 2.7% higher than the previous month. 

More than a fifth (21.6%) of household goods sales took place online in September. That’s 15.7% less than last year, and 4.2% down on the previous month. 

Online sales at ‘other’ stores – a range which stretches from electricals stores to booksellers and toyshops – accounted for 18.2% of sales. They were 4.5% lower than a year earlier, but 6.1% higher than the previous month. 

Non-store retailing, a category dominated by pureplay sellers and in which 89.7% of sales were online, saw spending fall by 8.1% on last year, but rise by 1.2% on the previous month. 

How shoppers spent across channels

Food sales were 1.8% down in September by volume, compared to August, and 3.2% below February 2020 levels. 

Non-food sales volumes were down by 0.6% compared to the previous month, and were 2.7% below pre-pandemic February 2020 levels. Household goods sales volumes were down by 1.5%. “Continuing feedback from retailers,” says the ONS report, “suggests that consumers are cutting back on spending because of increased prices and affordability concerns.” However clothing sales rose by 0.1% in volume “mainly because of growth in footwear stores”.

Non-store sales volumes were 3% down in September, compared to August. However, says the ONS, they were still 18% above pre-pandemic February 2020 levels. This group includes market stalls and auctioneers as well as online-only retailers. 

Analyst reaction

Silvia Rindone, EY UK&I retail lead, says the figures show the challenges facing shoppers, with sales volumes falling for the second consecutive month.

“Non-store retail continued its downward trajectory, falling 3% in September,” says Rindone. “However, as we enter the ‘golden quarter’, and with Black Friday a few weeks away, this may change. The FCI [EY Future Consumer Index] found that that nearly two fifths (41%) of shoppers are planning on doing most of their deal hunting online this year. The news will be welcome to many pure-play online retailers, particularly fashion retailers, who have been experiencing high commodity prices, rising delivery costs and product returns as well as issues with excess stock.

“The biggest challenges for retailers this Christmas will be pricing, inventory and how to deal with falling demand. The latest EY ITEM Club Autumn Forecast expects the UK economy to be in recession until the middle of 2023 so against this backdrop of increased uncertainty, consumers are likely to delay spending as late as possible to help manage their finances. Many retailers have already started heavy discounting to tempt shoppers to bring forward their Christmas spending.”

Melissa Minkow, director, retail strategy at CI&T, says: “Retail sales fell further in September by 1.4% as consumers reigned in spend amid a spiralling cost-of-living crisis. With inflation now jumping above 10%, consumers simply don’t have the luxury to spend excessively on non-essential items. For these reasons, it’s likely Black Friday will carry greater significance this year, as consumers hold out for the biggest discounts in order to save money on Christmas shopping bills.

“Approaching the festive season, although retailers will struggle this year, it’s likely that brick-and-mortar will remain relatively resilient. The joy has not gone from the in-person shopping experiences and people can still experience a festive day out with friends and family without spending too much. Brands need to focus on these moments, enhancing the in-store experience to drive more footfall.” 

Andrew Busby, retail industry lead at Software AG, says: “While consumer behaviour is still tough to predict, some trends are becoming clearer – more frequent shopping with smaller basket sizes, a move to own label goods, and people opting for frozen over fresh produce.

“The months ahead are uncertain, but the best way retailers can help customers is to spread the cost of Christmas. We haven’t seen the worst of the crisis yet, and retailers need to make the most of this period before consumers hold back on spend even more to accommodate higher energy bills over winter. There’s still some spending power left in consumers from Covid lockdowns, but if retailers leave enticing offers too late, consumers won’t be so prepared to pay. 

“Black Friday will support the lengthening of Christmas spend, and the flattening of spikes, so it’s likely to have renewed popularity this year. Throughout the Golden Quarter, brands must make themselves as attractive to shoppers as possible, listening to consumer trends and aligning stock levels based on their preferences.”

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