Back to school demand and improving sentiment boosts retail sales

19 October 2016 Consultancy.uk

Retail sales have shown slight improvement over the past months, on the back of back to school demand and improving consumer sentiment, according to the latest ‘Retail Sales Monitor’ from the British Retail Consortium and KPMG. Particularly online shopping has been boosted, driving growth across the industry. Retailers remain optimistic going into the final quarter. 

Offline retail

The retail sector saw some positive notes to market growth in the most recent quarter on the back of an increase in food sales, up 1.6% year on year – the biggest increase since 2013. Non-food, even with keen activity in the ‘back to school’ category, saw sluggish growth of 0.5% year on year in the same quarter. While children’s footwear saw a positive boost, lifted by strong discounting, women’s clothes and footwear collections suffered a slump from warmer autumn weather. 

Retail growth year on year

Retailers have had to contend with a sterling that is spiralling down following the referendum, increasing import costs, thereby creating inflationary pressures. However, shoppers remain relatively upbeat, with 76% saying that they expect their financial situation to improve or stay stable this year, suggesting that the final (and most important) quarter of the year will be relatively positive for retailers.

Helen Dickinson, Chief Executive of the British Retail Consortium, says, "Against the current backdrop of intense competition and transformational change in the industry, it’s crucial that retailers are able to continue their excellent track record of keeping prices low for their customers and offering great choice and value. With that in mind the BRC will be ensuring that in the forthcoming Brexit talks, Government negotiators have their sights set firmly lowering import costs as well as avoiding any increase in tariff costs as the UK leaves the EU.”

Online retail

Online shopping has again shown robust growth, up 10.2% on the previous year to hit non-food related sales penetration of 21.1% – around 10% when including food items. A number of categories have seen steady increases, including the ‘back to school’, which is enjoying increased online popularity. In terms of growth, children’s toys enjoyed the strongest online growth on the back of early Christmas shopping, while health and beauty, furniture and home accessories too saw strong growth with consumers eager to capitalise on end of season sales bargains. One category, footwear, saw a small decline, mainly due to continued preference from consumers to try before they buy.

Online shopping growth

The online sales category remains one of the key drivers for sales growth in the non-food retail segment across the UK, contributing 2.2% of the total retail sales growth between July and September. Physical stores remain important, even to the online experience, with considerable popularity for services such as click & collect and showrooming, both continuing to drive e-commerce. According to a recent analysis, UK’s B2C e-commerce market is worth €157 billion, making it Europe’s largest online consumer landscape. 

Paul Martin, who was recently appointed UK Head of Retail at KPMG, remarks, “Shoppers are more and more using a combination of the internet and high-street stores for the whole shopping journey; from browsing to the purchase itself. The result is that shops are increasingly becoming a destination to experience products rather than just to buy them.”

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