Online retail growth outpaces bricks-and-mortar footfall

06 June 2019 4 min. read
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Traditional retailers saw sales volume and value stabilise at the start of 2019, enjoying growth of 4%. However, while this might represent hope for bricks-and-mortar retailers, their figures paled in comparison to non-store retailers, who saw heightened expansion of 15% in the same period. 

UK retail continues to face uncertain conditions – Brexit anxiety and stagnant wages have hit consumer spending hard, while digital disruption has rocked the traditional brick-and-mortar retailers of old. The British high-street subsequently saw record numbers of closures last year, largely due to a reduction in openings, as risk in the sector continues to be high. 

Now, analysis from AlixPartners has explored market conditions affecting the industry, and found that in the period leading up to the end of February 2019, UK retailers saw a modest recovery. February in particular was a relatively strong month, with record temperatures in particular helping lift sales in the fashion industry and brick-and-mortar store channels. Overall, retailers saw value growth of 4.1% and volume growth of 3.8%, as consumers continued to spend. At the same time, internet sales were up by 10.2%, as people continued to favour remote sales.

Value and Volume Growth February 2018 - February 2019

While this is encouraging for the sector, retailers are, however, by no means out of the woods. The study notes that UK market conditions will remain tough for retailers – with the number of firms facing financial difficulties remaining high. This is largely due to longer term uncertainties around Brexit, which seem set to hit the UK economy around the end of the year.

At the same time, a number of key indicators continue to positively and negatively affect consumer sentiment. For instance, consumers are warier about borrowing, while the Bank of England is seeking to rein in consumer lending – salary growth was relatively positive, however, as a tightening labour market, and low unemployment of 3.9%, saw wages increase 3.4%.

Segmented improvement

Results varied between different market segments. Food saw the value of sales grow by 2.3%, thanks largely to the rapidly inflating cost of living in the UK. While volume floundered, then, food sales can still be considered ‘strong’, but not every aspect of retail can rely so obviously on the need of consumers to consume. Department stores were hard hit by the rough trading environment – with Debenhams falling into administration. The segment saw 0.4% value growth and 0.3% volume growth.

The fashion industry saw more positive sentiment, with value growth at 3.5% and volume growth at 4.9%. The sector continues to see strong internet sales growth, up 7.3% – although concern around serial returners has seen Asos seek to clamp down on the practice.

Subsector breakdown

Businesses that cater to household goods were the only segment to see overall decline, with value down 0.7% and volume falling by 1.3%. However, online sales were up 8.5% for the segment. The ‘other store’ segment saw relatively strong overall performance – with both value and volume up more than 7% in February. Online sales for the segment skyrocketed 32.3% for the period. Non-retailing saw the sharpest increase, with more than 15% growth in February.

With internet sales continuing to see strong growth, not even an unusually warm February was able to entice people to walk to the shop. Footfalls fell for the 37th consecutive month, down 4.4%, with the South East and South West and Wales seeing the sharpest decline at 7.4% and 8.0%, respectively.

Commenting on the findings, authors Dan Coen, Peter Saville, Sanjay Bailur, Nick Neil-Boss, Clare Kennedy and Kevin Wall concluded, “Although February was certainly a strong month for retailers, the question remains as to whether it can be repeated given the weak economic outlook... With Brexit uncertainties set to continue, economic growth beginning to slow and the availability of cheap credit beginning to decline, it may force consumers to be more selective in how they spend their pay packets in future months.”