Retail sales were flat in January, new figures from the British Retail Consortium suggest, although online sales showed some growth.
Meanwhile, Barclaycard findings suggest that shoppers spent more on both essential and non-essential items in January. But retail categories including clothing and electronics both suffered in the opening month of the year, the analysis suggests.
Retail sales analysis
The BRC/KPMG Retail Sales Monitor for January 2020 shows retail sales growing by 0.4% in January, and staying flat on a like-for-like basis that strips out the effect of store and business openings and closures. Spending online on non-food products grew by 2.5% – but was behind the 5.4% growth recorded last January. The January ecommerce figure is lower than both the three month ((+2.6%) and 12 month (+3.1%) averages. Meanwhile, a greater proportion of sales took place online in January (30.6%) than did a year earlier (29.5%).
Helen Dickinson, chief executive of the BRC, said: “January saw a return to growth, however recent political uncertainty and a decade of austerity appear to have ingrained a more thrifty approach to shopping among consumers. Furthermore, as sustainability continues to rise up the agenda, many customers are switching to more environmentally friendly products or simply choosing to buy less. These effects are not just limited to the high street as growth in online purchases also slowed.
“Across the UK, retailers are facing tighter margins as a result of weak consumer demand and increasing costs, including sky high business rates. We need to see a commitment from Government to bring down the overall burden of business rates in its upcoming review. In the short term, a move in the Budget to address Transitional Relief, which has seen retailers subsidising other industries by almost £500m since 2017 would prevent further shops closing and save jobs.”
Paul Martin, partner, UK head of retail at KPMG, said: “January is usually a quieter month for retail, and although static sales might not appear triumphant, at least it is no further deterioration.
“Consumer confidence has started to return post-General Election, but we have not experienced any major leaps for the sector yet. We have to remember, this semi-positive performance will also be the result of aggressive discounts and consumers’ preoccupation with bagging a bargain. That’s not always good news when looking at bottom lines.
“Health-focussed categories did benefit from consumers aiming to start the year with good intentions. Meanwhile, grocery sales – while still growing – were noticeably muted. This continues a trend we observed at the end of 2019, which could indicate more significant structural changes to the sector. Equally, online sales have also started 2020 with moderate growth.
“With Brexit ‘technically’ behind us, retailers will be hoping that consumers feel confident enough to reengage. But much remains unknown as we work towards defining our future relationship with the EU. Retailers are walking a tightrope between navigating any impact on their industry alongside ongoing changes in consumer behaviour.”
Commenting, Jon Buss, MD of Yext UK, said: “Today’s results show that that it’s no longer enough for retailers to assume that the store or brand experience alone can drive footfall. If consumers are to be attracted to the high street, particularly during times of uncertainty, then those businesses have to do their upmost to provide the best search experience with the right information, at the right time and on every platform.”
Consumer spending and sentiment
The Barclaycard findings suggest that overall consumer spending grew by 3.9%, year-on-year in January, says Barclaycard, which also says that its survey of more than 2,000 shoppers shows consumers feeling more upbeat about the UK’s – and their own – economic prospects. Some 42% of consumers feel confident about the UK’s economic prospects – in the highest vote of confidence since September 2016 – and 74% feel confident about their household finances – the highest level since last February. But 51% of those questioned believe that economic growth could slow in the months to come, while 56% say they are more conscious of their impact on the environment and will change their behaviour accordingly. A third (33%) say they plan to buy fewer plastic goods, while spending at discount stores rose by 9.5% in January.
Spending on essential items rose by 3.7%, including areas such as automotive fuel (+4.3%) and supermarkets (+3.7%). Purchases of non-essentials (+4%) also rose, especially at pharmacy, health and beauty shops (+5.9%) and on entertainment (+6.8%) Spending at travel agents (+4.2%) and airlines (+3.2%) was also up. But those selling clothing (-2.2%) and electronics (-1.4%) both saw business decline.
Esme Harwood, director at Barclaycard, said: “Consumer spending has had a boost in January and we’ve also seen confidence in the economy grow. Brits are planning holidays and enjoying box office hits. Traditional retail continues to face challenges though. How retailers respond to consumer demand for value for money and responsible shopping will be key.”
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