Retail sales strengthen, but electricals struggle

The electricals sector saw its fifth consecutive month of negative online growth in August, new figures have revealed.

The IMRG Capgemini Online Retail Sales Index showed that this was the longest sustained period of negative growth for this sector since tracking began in 2003.

However, as a whole, online retail sales were up by 16.4 per cent year on year, making August one of the best month for online growth so far in 2017.

This growth comes despite inflation of 2.9 per cent in August.

Bhavesh Unadkat, principal consultant in retail customer engagement design at Capgemini, said: “With the first half of the year marred by consumer uncertainty around Brexit and the general election, retailers must be hugely encouraged by the August results. After a strong July where those in the industry were forced to up their game to compete with Amazon Prime Day, could we be seeing a continuation of their discount strategies paying off? Or is it the Brits’ reawakened love of a ‘staycation’ that is the real driving factor.

“As we move into the winter months, it is vital that retailers maintain their efforts to keep the results on an upward trend. Despite this month’s success, and even at their 2017 peak, the figures were down by four per cent on August of the previous year – there is still a way to go if retailers want to round out the year successfully.”

Multichannel retailers saw 17 per cent growth, an upward growth from three months of single digit growth.

Justin Opie, managing director, IMRG, commented: “Online sales growth for multichannel retailers has been on a general downward trend in recent months and, while it’s too early to say whether this spike indicates the start of a reversal to this trend, there are other data-points that may help us understand what is happening.

“During Q2 of this year, click-and-collect penetration exceeded 30 per cent of online orders for multichannel retailers. The IMRG Blujay Home Delivery Review 2017 further indicated that the ability to combine click-and-collect with other shopping activity was the second most popular reason for choosing it. It’s possible that this points to a shift in how people are shopping in a more focused way across online and offline, perhaps spending less time actually browsing high-street shops (a drop in high-street footfall was reported in August, while like-for-like high street retail was up) but looking to take advantage of retailers’ store portfolios where convenient for them.”

Meanwhile, according to the latest data from the Office of National Statistics, the volume of retail sales in August grew by one per cent compared with July 2017. This was mainly driven by non-food stores and non-store retailing.

The quantity bought increased by 2.4 per cent, compared with August 2016, and is the 52nd consecutive month of year-on-year increase in retail sales.

The underlying pattern in the retail industry is one of growth, with the quarter-on-quarter quantity bought increasing by 1.2 per cent.

Store prices increased across all store types on the year, with non-food stores and non-store retailing recording their highest year-on-year price growth since March 1992, at 3.3 per cent and 3.2 per cent respectively.

Kate Davies, ONS senior statistician, said: “Within this month’s retail sales, we are seeing strong price increases across all store types compared with a year ago, reflecting wider inflationary pressures. However, we are still seeing underlying growth in sales volumes, and with strong growth in non-essential purchases as consumers continued to buy more from non-food stores.”

What Salmon says…

Hugh Fletcher, global head of consultancy and innovation at Salmon, comments on the latest sales figures and advises retailers to get ready to make the most of the next peak sales opportunities

It’s unsurprising to see online retail experiencing continued year-on-year growth (15.6 per cent) as shoppers crave greater convenience in their daily routines.

However, the sector as a whole should take note that expenditure in food stores and petrol stations were flat, indicating that shoppers were predominantly spending on non-necessity or even luxury goods and services.

The summer was likely a strong contributor to this, as schools were on a break, and tourism around the country would have been bolstered. In the coming months, we are very likely to see a noticeable dip as this kind of spending reduces now that the summer season is over, and uncertainty reigns over Brexit and house prices.

At this point, it’s vital the retailers start to look ahead to the next peak trading period and ensure they are ready to capitalise. Events like Black Friday and Christmas, and increasingly Halloween for some retailers, offer huge opportunities to reap additional gains. But, as consumers look to purchase items they want, not need, a focus on online and innovation will be absolutely paramount.

In fact, our own research found that 60 per cent would be more likely shop with ‘digitally innovative’ retailers. This is all about accessibility and convenience. The quicker and easier it is to buy from a retailer, the more popular that retailer will be – online, mobile and digital offerings across the board are therefore vital.

If retailers can combine a peak period with being the easiest way to shop – they are going to win and the kind of success seen over the summer will continue into autumn and winter.