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Online sales suffer as consumers hit shops for bargains
While overall shopping figures saw year-on-year growth in April 2023, online sales took a hit as shoppers look for cheaper goods in stores
The cost of living is having an impact on online sales as consumers seek out better prices in stores, according to data from the BRC-KPMG Retail sales monitor.
Figures from April 2023 showed online sales of non-food items had dropped by 3.6% year on year, while overall retail sales in April were 5.1% higher than the same period in 2022.
Paul Martin, UK head of retail at KPMG, said: “Online retailers continued to feel the pressure in April, with both sales growth and penetration rates falling as the market rebalances after the pandemic and consumers choose to bargain-hunt in-store.”
But the positive growth for overall retail sales was not necessarily “healthy”, according to Martin, who suggested increasing inflation could be skewing the figures.
“Retail sales held steady in April with 5% growth on last year, but against a background of higher inflation year on year masking how much is actually healthy growth for the sector,” he said.
Recent retail figures show that consumers are currently spending more but buying less, as the increasing cost of living drives up prices.
Customers are increasingly doing what they can to save money. Research from Adobe Analytics found that 12% of online spending from January of this year was through buy now, pay later (BNPL) fintech services.
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- As the pandemic caused an increase in online shopping, fashion businesses began to invest in technology to help them match customer demand.
- The pandemic solidified e-commerce’s ascendancy against the high street, with coronavirus accelerating technology adoption in many sectors as people were forced to stay at home.
KPMG-BRC’s monitor found 2022’s online sales growth was down by 13.9% year on year in April, as consumer behaviour began its shift towards a new normal.
As the pandemic forced consumers to work and shop from home, online sales spiked as people shifted towards online shopping to get what they needed without leaving their houses.
As pandemic lockdowns lifted, consumers began to move back to physical stores. Figures have taken a while to settle, with significant drops in online sales in 2021 and 2022 as the balance between online and offline shopping was restored.
Figures are flatter now, with the Office for National Statistics finding the percentage of total sales taking place online was about 25% for the first three months of the year.
Each month of 2023 has seen online penetration drop, both month on month and year on year, according to KPMG and BRC. In April 2023, for example, online non-food sales accounted for 37.3% of total non-food sales, compared with 38.8% in the same period last year and 40.3% in January 2023.
The most popular online shopping categories have also changed since April 2022, with sales of goods such as household appliances and health and beauty products growing in popularity. In contrast, clothing and computing have both taken a nose-dive, as fewer people have chosen to invest in these goods through online channels, both month on month and year on year.
These categories also saw a drop in total retail sales as consumers try to save as much as possible, as pointed out by BRC chief executive Helen Dickinson.
“While retail sales grew in April, overall inflation meant volumes were down for both food and non-food as customers continued to adjust spending habits,” she said. “Clothing sales underperformed as the poor weather left customers thinking twice before decking out their summer wardrobe.”
