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Shoppers turned to secondhand goods and away from furniture in October, spending less online but more across channels: ONS

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Shoppers bought more secondhand goods and less furniture – and spent less online – in October, reflecting the ongoing cost-of-living crisis, the latest official figures suggest. They spent more than they had a year earlier to buy fewer goods as the effect of inflation took hold, although spending values and volumes were both up on the previous month of September, according to the Office for National Statistics (ONS) Retail Sales report for October 2022

Just over a quarter (26.1%) of retail sales took place online, a trend that has remained steady since May but spending fell compared both to last October and to the previous month of September in most online categories – with the exception of non-store retailing and food. 

Shoppers spent 2.9% more in October than they did a year earlier, to buy 6.7% fewer goods, excluding automotive fuel. They spent 1.0% more than in the previous month of September, to buy 0.3% more goods, again, excluding fuel. However that’s in comparison with a September when sales had fallen 1.5%, in part due to retail closures on the bank holiday for the state funeral of Queen Elizabeth II. 

As a result of today’s figures, commentators suggest that retailers and brands need to plan now for what happens if peak trading falls short of expectations. 

How shoppers spent online

Shoppers spent 7.7% less online than a year earlier, and 0.7% less than in the previous month, September. 

Some 26.1% of UK retail sales took place online in October – maintaining a trend that the ONS report says has now been “broadly consistent” since May. That seems to suggests the proportion of sales taking place online has now settled at a new level that’s below pandemic peaks, but well ahead of the 19.6% of sales that were online immediately before Covid-19, in February 2020. 

Food sales were 8.9% online, with ecommerce spending down by 8.3% on last year, but up by 0.8% on September. 

In the non-store retailing category, which primarily includes pureplays but also includes market stalls and auction houses, spending was 88.8% online. It was also 6.2% lower than last October, and 0.8% higher than in September. Volumes in the non-store retailing category grew in October, compared to September (+1.8%).

More than a fifth (21.0%) of non-food sales were online. Ecommerce spending was 9.7% down from a year earlier, and 3.5% down on the previous month. 

Clothing, footwear and textiles continue to be the category that is most online, with 24.7% of sales taking place via ecommerce. Online spending fell by 8.4% on a year earlier, and by 2.7% on the previous month. 

At department stores, 22.5% of retail spending was online, with the amount spent falling by 6.8% on the same time last year, and 1.7% on the previous month. 

Just over a fifth (22.1%) of retail spending on household goods took place online. Shoppers spent 12.5% less than last October via ecommerce, and 3.8% less than in September 2022.

Some 16.5% of spending in the ’other’ stores category, which stretches from bookshops and toyshops to electricals retailers, was online. That’s down by 11.1% on a year earlier, and down by 5.5% on the previous month. 

How shoppers spent across channels

Shoppers spent 2.9% more in October than they did a year earlier, to buy 6.7% fewer goods, excluding automotive fuel. They spent 1.0% more than in the previous month of September, to buy 0.3% more goods.

The volume of non-food products that shoppers bought rose by 1.1% during the month, compared to the previous month. Volumes were up, month-on-month, at clothing stores (+2.5%) – but down at department stores (-0.3%), food stores (-1%) and household goods stores (-4%). Sales volumes in household goods stores – such as furniture stores – were also 11.8% below pre-Covid February 2020 levels. Clothing volumes were also down – by 3.7% – on February 2020 while food volumes were 4.1% below February 2020. However, ‘other’ non-food stores reported a 3.6% rise because of strong growth at secondhand stores – in particular at auctioneers. 

Industry comment

Jacqui Baker, partner and head of retail at leading audit, tax and consulting firm RSM UK, says: “Although there was an uptick in retail sales last month, driven by clothing up 2.5%, it’s hard to ignore what’s likely to be a bleak winter ahead. Consumers are looking at how they can tackle the fallout from the cost-of-living crisis in their spending decisions; even essential spend on food was down 1%, with shopping baskets getting smaller as inflation takes a hold.

“Despite the cost-of-living allowance given to consumers last month to offset the energy price cap increase, there’s still little sign of early Christmas cheer for retailers. This has led to many not being able to hold their nerve and starting offers early. The upcoming World Cup, Black Friday and Christmas may offer a temporary respite, but the question is are these just sticking plasters? 

“Retailers will be banking on Black Friday in particular to shift their excess stock. But with stalling demand, Black Friday probably isn’t going to be the panacea many cash-strapped retailers are hoping for. With bank balances running low, businesses should be scenario planning now for the event that the Golden Quarter may not deliver the cash they need, and waiting until January could be too late.”

Silvia Rindone, EY UK&I retail lead, says: “Although retail sales rose slightly in October, they continued their broad downward trajectory – coming in lower than they were in August – as consumers continued to cut back on discretionary spending on ‘big ticket’ items. The unseasonably warm autumn weather meant shoppers may have delayed buying their winter wardrobes, placing further pressure on many retailers and brands already contending with falling consumer confidence. 

“As a result, we are seeing numerous retailers heavily discounting ahead of Black Friday on 25 November. Many will be hoping the start of the 2022 World Cup will offer a much-needed boost, particularly to food store sales which fell by 1% in October. The announcement in yesterday’s Autumn Statement that energy bills support will be scaled back in April 2023, as well as the freeze on income tax thresholds, is likely to further dampen consumer confidence at a critical time for the retail sector. 

“Falling consumer confidence is now having a clear impact on retailers’ bottom lines. EY-Parthenon’s latest Profit Warnings analysis for Q3 2022 found that over 40% of FTSE Retailers issued a profit warning in the last 12 months as spiralling costs, supply chain and labour challenges combined with shrinking demand. Now, more than ever, retailers need to ensure they have a differentiated pricing strategy in place which secures consumer demand and allows them to pass on price increases to certain customer segments. They also need to ensure they have cash management plans in place to free up working capital which will be vital to surviving a challenging winter.”

And Alexia Pedersen, VP of EMEA at O’Reilly, says: “With only a slight recovery in retail sales last month, retailers must continue to focus on technological innovation to attract new customers in 2023. Digital skills such as software architecture, data analysis and AI and automation will enable retailers to remain competitive and spur growth. Yet, despite digital skills now being required for 79% of all retail jobs, such demand has outgrown the level of digital skills available.

“With the UK currently facing its most challenging economic climate in decades, now is the time for retail companies to deploy upskilling programmes alongside ongoing recruitment efforts to close the digital skills gap once and for all. Encouragingly, our research shows the majority (85%) of retail organisations will increase investment in tech L&D over the next twelve months. Likewise, employees should prioritise learning and development (L&D) to safeguard their role and make themselves an invaluable asset to their organisation. Ultimately, both employers and employees need to work together to create a highly-skilled digital workforce, which will be vital for the UK to remain at forefront of the global retail industry.”

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