Is The UK Retail Spending Approaching Pre-Pandemic Levels?

Only mild signs of recovery seen with the sector still trying to catch-up on lost ground

• Total retail sales were up marginally by 3.2 per cent in July 2020 compared with the same period previous year
• Food, furniture, and homeware sales rose as people invested in their homes
• Despite sunny weather, fashion sales continue to suffer

Last month was the second month of lockdown easing and demand for products & services is gradually picking up towards levels last seen before the coronavirus pandemic. Scared of going out and catching the deadly flu infection, people have migrated to online platforms for shopping. Public squares and high-street retail stores still appear deserted.

Most of the stores across UK have reopened with enhanced safety guidelines in the wake of the novel coronavirus. Since decades, the high street retail has thrived on high customer footfalls and impulsive purchasing. But now, these stores are struggling to attract customers.

On the other hand, online sales have been stable even after the stores have reopened across the nation. Notably, the British economy has formally entered recession for the first time since the financial crisis of 2008. The national GDP (Gross Domestic Product) is forecasted to fall by 9.5 per cent during the year 2020, according to the Bank of England estimates.

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Retail Shopping Trends Post Lockdown Easing

According to the British Retail Consortium (BRC), the reopening of non-essential retail has led to an increase in consumer spending across some places in the UK, close to pre-pandemic levels.

Most of the retail businesses in UK have recommenced operations in June 2020. The overall retail sales were up by 3.2 per cent during last month (July 2020) in comparison to same month last year. Since the easing of the lockdown, this is the second consecutive month of growth.

In-store sales of non-food items declined by 11.3 per cent on a like-for-like basis for the three-month period ending July 2020. However, the food sales have increased by 8.2 per cent on a like-for-like basis during the three-month period ending July 2020. Non-food sales rose by 7.9 per cent on a like-for-like basis during the three-month period ending July 2020 (though one cannot deny that the base has been very low as well). Apparently, these are the highest growth rate figures recorded since June 2009.

Demand for food related items has witnessed consistent growth year-on year. The non-food sales through online platforms witnessed an increase of 49.7 per cent during May - July 2020 on a like-for-like basis.

(Source: British Retail Consortium)

Retail Shopping Trends During Lockdown

The British government announced guidance and official quarantine rules to contain the spread of the Covid-19 pandemic on 23 March 2020. All the retail stores dealing in non-essential store types temporarily stopped trading to minimise people coming into contact and contain the spread of the deadly pandemic.

As per the data from Office for National Statistics (ONS), the monthly retail sales volume fell sharply by 5.1 per cent in March 2020 as the stores ceased trading following official government guidance during the coronavirus pandemic from 23 March onwards. However, in the monthly volume series in March 2020, food stores and non-store retailing were the only sectors to show growth, with food stores seeing the strongest growth on record, at 10.4 per cent.

The value for food, household goods and other non-food items all increased sales on the month by 15.3 per cent, 18 per cent and 16.4 per cent respectively in March 2020. These items recorded strong growths in comparison to the previous year. The value of food sales recorded a monthly growth rate of 101 per cent in March 2020, which was the strongest increase in comparison to the monthly growth rate of 2.6 per cent in March 2019. Supermarkets recorded an increase of 17.9 per cent for online food orders in March.

In addition, non-store retailing increased by 5.1 per cent month on month in value terms along with month on month rise in volume of goods by 5.9 per cent in March 2020. The non-store trading such as stalls and markets, and pop-up stores along with online stores fall under the category of Non-store retailing.

Huge sales of 31.4 per cent in terms of volume were recorded at alcohol stores and Supermarkets witnessed a strong surge in volume sales at 10.3 per cent. There was a huge surge in online orders as many stores ceased trading from 23 March 2020. However, some stores offered door to door delivery. As consumers switched to online platformsdue to enforced lockdown, the Online sales as a percentage of Retail salesmade a newhigh of 22.3 per cent in March 2020.

In comparison to previous year period, department stores witnessed a month on monthgrowth of 47.4 per cent in March 2020. The stores dealing in household goods recorded a month on monthincrease of 36.9 per cent in March. These stores witnessed increased sales of fridge-freezers purchased online in March for stockpiling requirements.

According to the data from ONS, the online spending done by the consumers have nearly tripled in ten years. It has increased from just 4.9 per cent (2008) to 17.9 per cent (2018). In addition, 54 per cent of senior citizens (aged 65 years and over) have shopped online in 2019. Nearly 90 per cent of the adults have used the internet daily in 2019.

The retail sales are one of the yardsticks to measure the health of the economy. The industry still must catch up lost ground as the in-store sales for most locations are lagging the pre-pandemic levels. The world desperately awaits a vaccine to resurrect the global trade. Due to the economic impact of the coronavirus pandemic, the consumer confidence has struck rock bottom. To exacerbate things, the high street retail stores are burning a hole in their pocket by rising costs, lower sales, and fixed costs such as rent, salaries, and other utilities. The high street retail has already witnessed a lot of job redundancies as they have suffered months of closures.

Conclusion

E-commerce platforms are going to be the new normal for shoppers in the near term. Britons purchased homewares and accessories online post lockdown. In addition, sales of computer systems have increased as the remote working culture is being promoted across industries. The UK government’s Job Retention Scheme being discontinued by the end of October 2020. Therefore, September figures would give us a better picture in terms of understanding the consumer behaviour, and disposable income. High-street retail businesses must consider re-establishing themselves in the digital arena to hedge against uncertain times, in case the second wave of infections comes around in winters, as is being projected.