Online sales finally reach equilibrium, while High Street stumbles
Online sales peaked at 37% of the entire retail market in February 2021, during the height of Covid lockdowns, but then started to fall back. How far they would fall before reaching a new equilibrium is a question retailers have been asking for months. The home delivery expert ParcelHero says today’s Office for National Statistics (ONS) retail figures show online sales have now stabilised. In September, they held firm at 26.4% of the market, broadly speaking where they have sat since May.
ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T., says: ‘For a long time, retailers have wondered what the “new normal” for retailing is. Now we seem to have our answer. For much of this year, online sales have held on to around 25-26% of the overall retail market. While that’s far from the giddy heights of 37% in February 2021, it’s still well above the 19% online was averaging before the pandemic hit in March 2020.
‘Unfortunately, it’s not terrific consolation for specialist online retailers such as ASOS who overexpanded during the pandemic. This month, it revealed its annual profits have fallen by -105%, leading to a significant £10m operating loss. In contrast, last year it made a profit of over £190m. However, at least retailers now know where the bottom is and can plan accordingly.
‘High Street retailers, however, are still having a torrid time, which won’t be helped by the tumultuous changes at the top of Government. Consumer confidence is clearly faltering. Retail sales overall fell by -1.4% in September 2022 and are -1.3% below pre-coronavirus February 2020 levels.
‘Rising prices and the cost of home energy bills are the chief reasons for the fall, as shoppers drew in their horns to prepare for an expensive winter ahead. Even more concerning for retailers, most of the period covered by these latest ONS figures date from before the former Chancellor’s disastrous mini-budget of 23 September. This will have undermined consumer confidence even more and further increased the price of goods.
‘Perhaps the most telling figure is the comparison between September 2022 and September 2021. Even though people spent 3.8% more this September, the quantity of items they bought fell by -6.9% compared to last year. In other words, it cost us significantly more to buy significantly less. That’s the impact of rising inflation.
‘One mitigating factor was that the Queen’s funeral took place in September, which lost most High Street retailers a trading day. However, this additional Bank Holiday is unlikely to have changed these results in any fundamental way.
‘Returning to online figures, a year-on-year fall of -8.2% in the value of sales shows why online-only retailers such as ASOS are now feeling the pinch. However, September’s results were actually up 1.2% month-on-month, highlighting the fact that we now seem to have reached some kind of stability.
‘As retail settles to a new equilibrium, it will be those retailers with strong in-store and online sales that will ultimately triumph in a post-Covid world. ParcelHero’s influential report “2030: Death of the High Street” has been discussed in Parliament.