Football festivities and hot weather made shoppers keep off the high-street and buy food and drink online in July, bringing the strongest sale growth in five years new figures from the British Retail Consortium (BRC) suggest today.
But, as Paul Martin, UK head of retail at KPMG argues that retailers must reinvent themselves and adapt to the changing retail environment to "improve the health of high-street."
Online sales of food products rose by 3.1% in July compared to the same time last year. That’s up by 4.5% growth seen in May 2018 and ahead of the five-year trend and the 12-month average showing year-on-year (YoY) sales growing at more 3.8%. At the same time, UK high street sales spiked to 0.5% on the YoY basis from same time last year, when they had increased 0.9% from the preceding year.
Helen Dickinson OBE, chief executive, BRC says:“Last month’s sweltering temperatures kept shoppers focussed on eating, drinking and keeping cool. Food sales had their best July in five years, while fans and cooling equipment flew off the shelves."
"Physical stores have been particularly affected by pressures on consumers while costs borne by retailers have continued to rise."
Paul Martin, UK Head of Retail, KPMG comments: “For all the hopes placed on the World Cup and the glorious weather, it seems retail sales still fell short of expectations, growing only 0.5 per cent on a like-for-like basis in July 2018. It was perhaps just too hot to hit the high street!"
“July’s performance reinforces the fact that it will take more than events-based retail and sunshine to improve the health of the high-street. Retailers must improve efficiency, in many cases reinvent themselves and adapt to the changing retail environment, including last week’s interest rate rise.”
“Unsurprisingly, food & drink fuelled the majority of sales growth thanks to summer BBQs, picnics and football festivities, whilst elsewhere growth was mainly witnessed among the holiday essential categories, including health & beauty, deck chairs and fashion. This was particularly true when comparing the high street to online, with the latter faring considerably better."
Online sales on non-food items surged by 7.5% in July, against a growth of 8.3% the same time last year. That’s down on the three and 12-month averages of 9.2% and 7.9% respectively.
High-street non-food sales grew by 0.2% on like-for-like (LFL) basis and 1.2% on a total basis. That’s higher than the 12-month total average decrease of 0.2% and the best 3-month average since June 2017. However, after two months of growth, July sales were back in decline.
Overall, total UK retail sales increased by 1.6% across all channels, compared to the same time last year. That’s below the three month average of 2.7% but in line with the 12-month average of 1.6%.
Helen Dickinson adds: "[Total] sales growth slowed as the heat laid bare the underlying weakness in consumer spending. Sales of non-food products struggled - three months into an extended period of summer weather, demand for many seasonal purchases has slowed while the heat has kept shoppers away from days spent browsing new ranges. For many in the industry, Autumn could not come sooner."
“Although the weather generates a shift in month-to-month spending, trend growth remains very low by historical standards. Over the last year, in-store sales of non-food products fell 2.5 per cent, at the same time as business rates bills increased nearly 3 per cent."
Hugh Fletcher, global head of consultancy and innovation at Salmon, a Wunderman Commerce Company comments on the figures: “While online sales continue to flourish against a shaky retail environment, it is worth noting that in-store food sales, which are traditionally not bought online, had their best July in five years."
He concludes:“This highlights the importance of retailers maintaining and developing a multichannel approach to sales, both online and offline – the high street is far from ‘dead’ and remains an attractive proposition for many consumers. With nearly four months until the next big peak – namely Black Friday – brands must ensure that they remain innovative and appealing to their customers online too. By creating a unique and balanced ecommerce strategy that encompasses marketplaces, retail websites and own brand websites, brands will be able to fully maximise sales as they move towards the ‘business end’ of the year.”
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