Online shopping boom creating more pressure for stretched British retailers

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Online shopping boom creating more pressure for stretched British retailers
Online shopping boom creating more pressure for stretched British retailers

The pressure on Britain’s store owners has been highlighted starkly in new figures showing almost one fifth of all shopping last month was done online.

Data from the UK’s Office for National Statistics showed internet spending accounted for a record 19.9% of total retail sales.

While the share has been creeping up for years, there was a one percentage point jump in July alone, suggesting Amazon’s Prime Day discounts played a significant role. That underscores the pressures faced by UK retailers, who have been squeezed by the rise of online shopping and a backdrop of Brexit uncertainty.

The fallout has meant high-profile problems for store owners such as House of Fraser and Debenhams, while the likes of electronics chain Maplin have collapsed.

“As our high streets keep feeling the heat, there is no way back from the road towards online shopping,” said Duncan Brewer, retail and consumer partner at consultants Oliver Wyman.

The July data showed that overall UK retail volumes rose 0.2% from June, but a driving force behind the increase was online promotions.

Worse still, the better-than-expected headline figures — sales were forecast to fall — masked weakness across a range of stores. Food sales flat-lined, non-food sales posted the biggest drop in seven months, while total sales growth over the past three months was the weakest this year.

Conversely, non-store retailing, which includes internet sales, rose the most since May 2016.

Figures in June showed the number of retail businesses on UK high streets fell by 2% between 2012 and 2017, while those based elsewhere grew by 6%.

Amazon Prime Day is an annual event designed to attract users to the firm’s premium delivery service. In the US, Amazon said sales over the two days this year surpassed those on rival discount shopping days Black Friday and Cyber Monday combined.

Britain’s economy contracted in the second quarter, a hangover from stockpiling before the original March 29 Brexit deadline, despite solid growth in household spending.

Sterling showed little reaction to the latest data, which contrasted with a British Retail Consortium survey that showed spending fell in the year to July at the fastest pace on record for that month.

“Retailers won’t be getting carried away by these (ONS) figures,” Karen Johnson, head of retail at Barclays Corporate Banking, said.

“They will continue to be mindful of the looming Brexit threat and potential impact on their international supply chains, with possible cost increases and price rises on the horizon,” she said.

Although still declining across the quarter, there was an increase in sales for department stores in July for the first time this year,” ONS statistician Rhian Murphy said. “Strong online sales growth on the month was driven by promotions.

Stable inflation, the strongest rise in wages since 2008 and some of the lowest unemployment rates since the mid-1970s have continued to boost UK household incomes, although after inflation wages are still below their peak before the financial crisis.

But there have been signs that consumers could turn more cautious as Britain’s political crisis drags on. Household savings, relative to income, is not far off record low levels.

News from retailers has been mixed. Fashion chain Next shrugged off Britain’s retail gloom earlier this week and has reported a surprising rise in full-price sales.

But baby products retailer Mothercare blamed an uncertain and volatile home market coupled with fragile consumer confidence as reasons it would not report a rise in annual profit.

– Bloomberg and Reuters

Source: Business News