January sales improve slightly but retailers need to get digital

January sales bounced back slightly, despite a persistently tough trading period throughout 2017, new figures have shown.

In January, UK retail sales increased by 0.6 per cent on a like-for-like basis, according to the BRC-KPMG Retail Sales Monitor.

On a total basis, sales rose by 1.4 per cent in January, compared with growth of 0.1 per cent a year earlier.

In the three months to January, non-food sales in the UK fell by 1.2 per cent on a like-for-like basis and 0.6 per cent on a total basis.

Over the same three-month period, in-store sales of non-food items declined by 2.9 per cent on a total basis and 3.6 per cent on a like-for-like basis.

Online sales continued on its upward trend with growth of 5.3 per cent in January, which was slightly down on the eight per cent growth seen in January 2017.

The online penetration rate also continued to grow, increasing from 21.9 per cent in January 2017 to 22.2 per cent in January this year.

British Retail Consortium chief executive Helen Dickinson (pictured) said: “The persisting tough trading environment played out at the start of the year with a mixed set of trading updates and subsequent announcements. Sales as well as profits are seemingly harder to come by. Against this challenging backdrop, 2018 didn’t have a bad start during what is traditionally a lean month, with sales creeping up in line with the year’s average.

“The figures paint the same old picture of divided fortunes for food and non-food sales. Rising food prices continued to inflate sales growth and absorb the lion’s share of shoppers’ squeezed budgets, while sales of non-food items struggled in January, dragging the 12-month average into negative territory for the first time in nine years.

“Overall though, the going remains bumpy as consumers are still seeing wages fall in real terms. Although inflation will ease a bit this year, these pressures will remain. So to ensure no more pain is added to household budgets, we want to see our Brexit negotiators focus on delivering the terms of the transition to provide businesses and consumers with some much needed certainty.”

Hugh Fletcher
Hugh Fletcher

Paul Martin, KPMG head of retail, commented: “January typically presents retailers with a tough gig persuading shoppers to spend in what is a cash-strapped month for most. With that in mind, 1.4 per cent growth – or 0.6 per cent on a like-for-like basis – has to be seen as a success, albeit food sales continue to be the driver of this growth.

“There was little growth in most categories besides food. Bigger-ticket items such as furniture traditionally rely on strong post-Christmas trade, but this year seem to have struggled to woo consumers with the lure of a sale sign in the window. Online sales fared better, with bargain hunters most interested in fashion and tech.

“With Christmas reporting now behind us, the true financial health of the industry comes into focus. For many retailers, online sales have taken the sting out of the challenging trading environment. It’s therefore not surprising to see many retailers rethink their physical presence. Ensuring you can deliver a customer-centric and channel-agnostic proposition will increasingly split the winners from the losers in 2018.”

Hugh Fletcher, global head of consultancy and innovation at e-commerce consultancy Salmon, added: “While sales overall increased marginally, online came out as the clear winner, with online penetration rate increasing to 22.2 per cent in January. We are now seeing the fruits of investment in online operations of retailers and brands now coming to the fore, leaving the digital laggards nowhere to hide.

“Brands need to look at the lessons they can learn from those that are demonstrating strong online channels, and how they too can create a stronger online presence that offers an engaging experience for prospective customers – we are even seeing some experiment with innovative services such as voice ordering. It is this forward thinking that will help to capture the hearts of customers and grow that loyalty base, which is vital in today’s retail market.

“Retailers need to keep pace with consumers and provide the technological innovation that they expect and crave. We recently found 57 per cent of consumers believe their technology capabilities are in fact more sophisticated than those that retailers currently offer. By providing customers with the services that they desire, they will see success this year as online channels become an even more prominent player in the retail landscape.”