Positive January sales could be a turning point for the high street

Over the past couple of years it has been difficult to weed out the positive news about the state of the UK high streets, as most headlines have been occupied by the words like “Brexit”, “Negotiations”, “Uncertainty” and so on.

While we’re still working out the exact details of the UK’s trading options, it appears that consumers are starting to relax and become less uncertain and concerned about spending their money.

This is reflected in the latest ONS retail results for January 2020, which found that retail volumes increased by 0.9% that month, and was almost equally split between food and non- food stores, showing that it’s not just groceries that consumers are starting to splash the cash on.

This was the largest monthly rise since March 2019, and a stronger performance than was expected by economists.

As reported by London Loves Business, Ranko Berich, head of market analysis at Monex Europe, commented that January’s retail sales report suggests that “UK consumers are joining in the burst of optimism experienced by businesses in the new year”.

Berich comments: “Retail sales, like business sentiment, had been stagnating for most of the second half of 2019. The sharp increase in January suggests this may have been due to the same political uncertainty that hampered business sentiment.

“ONS seasonal adjustments may have added more noise than signal over the past couple of months. Unadjusted core retail sales actually fell 29.1% month on month, which is typical for January. But January’s adjusted of 1.6% increase comes after an adjusted fall of 0.8% in December, when the unadjusted figure was, confusingly, actually showing fairly decent growth.

“This noise is understandable given the political uncertainty in Q4, changes in consumer shopping habits, and black Friday timing. However, in this instance, the adjusted December and November figures may have given an overly negative impression of UK consumption.”

Berich continues: “In isolation, you’d be tempted to apply the usual caveats and disregard retail sales as one data point in a volatile series. But, other incoming UK data also suggests a strong pickup for the economy: business sentiment has improved sharply and house price growth has accelerated. Whatever the coronavirus shock and EU trade negotiations hold for the future, the UK economy has at least begun the year on a firm note.”

Despite the rebound seen in January, sales for the three- months to end-January fell, with the number of goods bought falling by 0.8% and declines across all sectors during the quarter.

“There is still plenty of opportunity for businesses of all shapes to not just survive, but thrive” Jon Buss, Yext

In fact, previous research by the British Retail Consortium (BRC) suggested that 2019 may have been the worst year in 25 years for retailers, pointing out that total sales fell by 0.1% – the first annual sales decline since 1995.

For 2019’s Christmas period in particular, ONS reported that overall sales in December were down 0.6% against November’s official figures, with UK courier services ParcelHero saying only e-commerce sales prevented a complete retail collapse this Christmas.

“December’s retail sales results were a grimly fitting finale to a truly dire year for retailers,” says ParcelHero’s head of consumer research, David Jinks MILT.

“Spending was down 0.3% and the amount we bought down 0.6% against November. The one bright point was a strong performance for many retailers’ websites. Online spending was up 1.6% against November, with department stores’ web sales booming: up a heartening 15.5% against November.

“Footfall may be falling, but many consumers still prefer to buy more valuable gifts from familiar stores – even if they chose to do so online,” points out Jinks.

“And there was more good news for retailers as their overall online sales grew 5.6% against December 2018. That’s a strong year-on-year result.”

Jinks concludes: “Overall, December’s retail figures show shoppers like the peace of mind of the extra 14 day no quibble returns that online sales enjoy, but still like to buy from big name retailers. The close collaboration between stores and the courier services trusted for their home deliveries means shoppers were happy to have more items than ever delivered to their homes this Christmas.”

“Customer expectations have shifted with many preferring to purchase goods online rather than in physical stores” Anne Sheehan, Vodafone Business

Back to January 2020, and while the retail figures are positive, it’s not quite plain sailing just yet. Jon Buss, MD of UK and Northern Europe at Yext, shared his thoughts on what retailers need to address so that they can continue this growth and keep up with consumer expectations.

“Boosted by January discounts, it’s positive to see that sales at the start of the year grew slightly – however there is still plenty of opportunity for businesses of all shapes to not just survive, but thrive.

“While online retailers may be going from strength-to- strength, a huge chunk of the overall retail market still lies at the feet of the high street. With bricks and mortar retail holding the majority of sales, talk of retail doomsday is far off,” says Buss.

“To continue this growth, the fusing of offline and online retail must become even more prevalent. Today, the modern consumer’s first step of a retail journey begins online, so having the correct information such as answers to FAQs, hours of operation or even an address or phone number – could be the difference between heading to the high street or not. And essentially a sale made or lost.”

Buss says that while many retailers are largely focused on the in-store experience, they are often neglecting the very start of the customer journey, which he says so often begins online with a search query.

“Delivering the right information – i.e. making sure brands are ready to provide answers on their websites and on the major platforms like Google, mapping apps, social sites and voice search – is imperative to ensuring that an online search translates into an in-store experience.

He adds: “In a world where data and information is a currency of its own, it pays to be right every time. For retailers, attracting and retaining loyal customers, building a reputation and competing with online retailers will stem from providing shoppers with the right information, consistently.”

Commenting on the ONS report, Anne Sheehan, director at Vodafone Business, says: “A number of factors have led to the transformation of the retail sector over the years; customer expectations have shifted with many consumers preferring to purchase goods online than in physical stores; same-day delivery is commonplace; and an ‘always on’ approach to customer service is required to respond to any and all requests.

“Retailers are now on the cusp of a whole new era. The introduction of technologies such as 5G, the Internet of Things (IoT), augmented reality (AR) and virtual reality (VR) will drive innovation and new customer experiences; and enable retailers to deliver better value to customers whether in store, at home or on the go – from tailored deals and promotions to uniquely personal in-store experiences.”

There’s no doubt that the UK high street still has a lot to battle against, with its decline being attributed to a range of causes. High business rates, national living wage rises, Brexit and weak consumer confidence are all factors that today’s UK retailers come up again.

But as we start to feel a conclusion is in sight for Brexit and consumers are in turn getting their buying confidence back, 2020 could be the year we start to see some real, positive change in the retail sector.

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