Retail sales continue to recover

Retail sales over the month rose 2.8% by value compared to July 2019 (on a non-seasonally adjusted basis and excluding fuel), the strongest performance since August 2018.

However, the sector is not out of the woods. The latest survey of consumer confidence from GfK (the market research organisation) reveals that sentiment remains depressed, with its index recording a measure of -27 in August, unchanged on July but more than twice as negative as a year ago.

More importantly, the recovery is patchy. Home-related products continue to sell well with the DIY and gardening sub-sector recording a sales uplift of 11.2% in July, and furniture and flooring (+9.5%) and homewares (+8.4%) also performing strongly. By contrast, footwear (-27.9%) and clothing (-22.9%) suffered very steep year-on-year declines, continuing the pattern of lockdown.

The relative strength of home improvement is potentially surprising given that July was the month in which restrictions on retail were eased more widely, giving consumers more freedom to spend outside of the home, including in pubs, restaurants, and beauticians.

Overall, online sales have continued to support the recovery. Online sales were 54.1% higher in July than the same month a year previously, though that did not match the 73.5% increase posted in June.

Stores continue to improve…

Footfall in stores is slowly recovering. Data from Springboard reveals that footfall in retail parks was down only 10.6% in the week to 24 August compared to the same period a year ago, though shopping centres and high streets posted deeper declines of 32.4% and 39.1% respectively. 

Central London continues to suffer particularly badly, with footfall that week down 61.2% compared to last year. Other city centres are also struggling, but the average decline in footfall of 49.8% in regional centres is less severe than in the capital.

…but online remains the star performer

Online sales accounted for 28.1% of total retail sales in July (by value and on a non-seasonally adjusted basis), though that was slightly lower than in the previous month. This may be a sign that the dominance of online over physical shopping is just beginning to slow. July’s online sales increased 54.1% year-on-year compared to 73.5% in June, whilst the rise a year ago was just 14.3%.

Average online sales growth has now dipped below the three-month average of 62.3%, but remains well above the 12-month figure of 23.8%. And online sales were undoubtedly crucial in supporting the overall retail environment in July. The Retail Economics report provides more detail, but there are sectoral highlights.

• Online food – this was the stand-out performer again, posting year-on-year sales growth above 100% for the third consecutive month, at 109.2% in July.
• Online clothing and footwear – here, sales growth of 23.0% year-on-year was healthy, though down on 34.3% a month ago. Online sales of clothing and footwear accounted for 28.4% of total online retail sales in July, up from 17.3% a year ago.
• Online household goods – sales rose 82.8% year-on-year in July compared to the 9.4% rise registered in July 2019. Online household goods accounted for 22.0% of total retail sales in July, up from 13.4% in the same month of 2019 – the average weekly spend stood at £154m, compared to £84m a year previously.
• Other non-foods – sales in this sub-sector (including DIY and gardening, health and beauty and some electricals) rose 92.9% year-on-year in July. Again, this was a dramatic improvement on the summer of 2019, when the sector registered growth of 21.3% in the same month.

The dramatic increase in online shopping continues to underpin and accelerate a fundamental channel shift in the retail industry. Today’s customer journey is very different to the experience of a decade ago. Technology advances in connectivity, online platforms and connected devices have spawned new consumer groups and driven more complex interactions.

Retail Economics’ analysis suggests the connected customer journey now involves five stages of interaction between consumers and retailers.

• Stage 1 awareness – where consumers initially discover retailers and brands, and their products and services in the different channels.
• Stage 2 research – where shoppers consider products in more detail.
• Stage 3 purchase – where shoppers make decisions about different payment options, promotions and decide on the most appropriate channels to buy goods.
• Stage 4 fulfilment – where retailers work to get products into the hands of consumers.
• Stage 5 service and returns – where retailers work to resolve any issues from the purchase and fulfilment stages during the post-sales experience.

To discuss how Santander can help your business please contact: ccbsectorinsights@santander.co.uk