July non-food sales ‘relapse’ as competition heats up

Latest figures for retail sales showed that in-store non-food sales were flagging in July compared with online, which was up by 8.3 per cent. A rise in browsing from abroad, however, promised new opportunities for retailers with an e-commerce offering.

On a total basis, all UK sales rose by 1.4 per cent in July, compared with growth of 1.9 per cent in July 2016, according to the BRC-KPMG Retail Sales Monitor.

On a like-for-like basis, sales rose by 0.9 per cent from June 2016, where they increased by 1.1 per cent.

In the three months to July, non-food retail sales decreased by 0.7 per cent on a like-for-like basis and 0.4 per cent on a total basis.

In-store sales also fell by 2.6 per cent on a total basis and three per cent on a like-for-like basis over the three months to July.

However, this was offset by online sales, which saw 8.3 per cent increase in non-food retail sales in July. Over the three months to July, online sales also grew by 7.8 per cent.

The BRC-Google Online Retail Monitor also showed that search volumes for products on smartphones in the UK increased by 26 per cent in the second quarter of 2017, compared with the same quarter a year ago.

Search volumes across all devices in the UK maintained year-on-year growth of seven per cent in Q2.

British Retail Consortium chief executive Helen Dickinson said: “Sales growth slowed in July from June. That said, given the strong performance of the same month the previous year, the figures are fairly solid. Closer inspection of the headlines, however, unveils some familiar challenges. The month’s growth was underpinned by food sales alone, while non-food sales relapsed into negative territory as the competition heats up over a shrinking pool of discretionary consumer spending power.

“Against a backdrop of increased consumer borrowing and shrinking real wages, we can expect food to continue making the running for sales growth for the time being, although driven more by price than volume, with non-food continuing to struggle. The tough outlook for customers means that ensuring that prices remain low, and choice and confidence remain high, lies at the heart of what a fair Brexit for consumers looks like. So ensuring tariff-free trade with the EU must be the focus for Government as it resumes negotiations at the end of this month.”

On the smartphone searches, Ms Dickinson added: “One-in-five pounds are now consistently spent online for non-food purchases at home, while the growth in mobile browsing from the EU demonstrates a stable appetite for UK brands from overseas consumers. Satisfying this interest from abroad through retailers’ digital offer, is crucial to go some way to offsetting the more discretionary spending habits of hard-pressed UK consumers.”

Paul Martin, UK head of retail at KPMG, added: “July retail sales diverge from the latest consumer confidence figures, which noted a downturn in consumer sentiment. This divide suggests that UK shopping patterns remain mixed, although with demand continuing to be weak, retailers would be wise to remain cautious.”

Hugh Fletcher, global head of consultancy and innovation at digital commerce specialist Salmon, commented: “The figures from BRC offer mixed feelings for retailers as high-street sales decreased, yet spending online was seen to go up. The positive story for e-commerce demonstrates the changing nature of today’s increasingly digital consumer. Innovation and a focus towards a robust e-commerce strategy, combined with a strong offering in bricks-and-mortar stores, is the only way that retailers will be able to keep up alongside evolving customer traits that demand greater convenience and immediacy. Retailers that don’t have this omni-channel offering will most likely see growth shunted and falling profits.

“With consumers becoming ever more expectant and demanding of retailers, what they cannot afford to do is sit and wait for their closest competitor to transform. Instead, brands must test and trial new technology-driven concepts to appease the customers’ craving for instantaneous services, much like digitally-native organisations Deliveroo, Uber and Amazon offer. Amazon is a leading example of an online retailer that has entirely dominated the retail industry and is now shifting into new markets, such as the home with Amazon Echo, and grocery with Amazon Fresh and Music. Amazon’s continued retail supremacy is an ongoing trend away from brand loyalty in favour of a service loyalty approach. As the share of the customers’ wallets are shrinking, it’s never been more important for retailers to evolve their business to embrace new, tech-driven ideas such as artificial intelligence, IoT and virtual reality if they are to keep up with the likes of the best in the business and attract new customers.”