ONS: February’s figures show early signs of brighter days ahead for retailers

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Retail sales volumes only partly recovered in February 2021 with an increase of 2.1% when compared with the 8.2% fall seen in the previous month, and sales were still down by 3.7% on a year earlier before the impact of the coronavirus (COVID-19) pandemic, the latest figures from the Office for National Statistics (ONS) reveal.

Non-food stores provided the largest positive contribution to the monthly growth in February 2021 sales volumes, aided by strong increases of 16.2% and 16.1% in department stores and household goods stores respectively.

Clothing retailers reported the largest fall, of 50.4%, in sales volumes when compared with February 2020 before the coronavirus pandemic; automotive fuel stores also reported a large annual decline of 26.5% as travel restrictions continued to hit sales in that sector.

In the three months to February 2021, retail sales volume fell by 6.3% when compared with the previous three months, with strong declines in both clothing stores and other non-food stores.

The proportion spent online increased to 36.1% in February 2021, the highest on record; this compares with 35.2% in January 2021 and 20.0% reported in February 2020.

Commenting on the figures, Richard Lim, CEO, Retail Economics said: “The industry continued to see a sharp polarisation in the performance of food and non-food as restrictive measures forced the closure of many retail premises. Non-food retailers saw sales plummet on the previous year with apparel retailers being some of the hardest-hit. 

“But as the third lockdown took hold, shoppers effortlessly switched to digital channels as the proportion of online sales reached new record highs. Online grocery shopping continues to grow exponentially and it seems inevitable that some consumers will adopt these shopping habits for good. 

“Likewise, retailers have become increasingly agile operating through periods of lockdown. Strategies are in place and measures have been formed to quickly shift towards digital channels for many parts of the market. That said, the industry continues to struggle with the sheer pace of change. Significant investment has been made in boosting warehouse capacity, enhancing logistics and expanding distribution networks to meet the challenge of a step-change in online shopping.” 

Lynda Petherick, head of retail, Accenture UKI, said: “A dire January capped off what’s been a rocky year for retailers, to put it mildly. Finally though, thanks in large part to the impressive vaccine rollout so far, February’s figures show early signs that there are brighter days ahead for retailers. However, we are still a long way off from recovering to numbers compared to this time last year. With the April reopening date for non-essential retail still on the cards, retailers will be planning how they can make the most of pent-up consumer demand this spring and beyond.

 “If the last year has shown us anything, it’s that consumers are willing to embrace e-commerce wholeheartedly when deprived of physical retail, which has been especially evident in this month’s record-breaking online expenditure. While we expect this shift online to outlast the pandemic, catering for the increased demand for physical stores is also crucial. Brands will have to think carefully about how they factor in the different channels to their future strategies to make sure all customer needs are met, combining a safe and engaging in-store experience with an advanced digital offer. Those that are slow off the mark now will find it harder to catch up later.”

Ian Geddes, head of retail at Deloitte, said: “Modest month-on-month growth across total retail sales (ex. fuel) points to growing optimism as consumers increased their spending despite the UK remaining under lockdown. However, with many still working from home and limited permitted opportunities to meet socially, clothing and footwear sales are below where they should be at the start of a new season.

“February’s announced roadmap out of lockdown will have boosted consumer confidence. At the same time, fewer spending opportunitiesover the last year has improved savings for some. Those with greater disposable income are poised to spend, with pent-up demand likely to see an enthusiastic return to high streets as restrictions ease.

“In the meantime, consumers continue to spend online, accounting for a record 36.1% of sales this month. Whilst second nature to many consumers, for others the pandemic necessitated a shift to online shopping – one which is now entrenched.

“As we edge towards the reopening of physical retail, one cautious tale remains. Those retailers honouring extended Christmas returns for in-store purchases will be opening stores for the first time since the festive period. This is likely to create a lag on the usual January refund period, with some consumers looking to belatedly return unwanted gifts.

“Retailers can, however, expect a more prosperous end to the quarter. February’s improved sales could be linked to the reopening of schools, and next week’s easing of private garden gatherings is likely to be reflected in the month ahead. Whilst consumers spent much of 2020 sprucing up their homes, attentions will now turn to outdoor space, with fire pits, pizza ovens, and rattan furniture likely to contribute to March sales.

“Combined with warmer weather, further relaxation of some social gathering rules, and the Easter weekend, March could also see food and DIY purchases drive sales as consumers get together or take on bank holiday home projects.”  

Silvia Rindone, EY UK & Ireland retail leader, said: “The ongoing closure of non-essential stores continued to limit overall retail sales in February. Figures were again below average compared with previous years, but online sales have continued to enjoy significant growth. However, consumers are becoming more discerning when it comes to the online shopping experience, so retailers must continue to improve their online offer and not take continued growth in this area for granted.

“Our most recent Future Consumer Index has found that 25% of consumers are growing frustrated with not being able to find what they are looking for easily when shopping online. For the grocery sector, almost half of consumers do not shop online because they have less control over purchases and only 11% believe grocery websites are better than physical stores.

“As retailers look forward to the reopening of non-essential stores, they will need to be strategic about balancing their in-store and online operations. Our Index revealed that many shoppers like to mix and match their research and purchasing across both channels – anticipating and catering to these demands will be crucial. Retailers must look to truly integrate their channels so they can best capture consumer demand across both, ensuring long-term growth in the post-pandemic era.”