British shoppers have notched up the fastest quarterly growth in online retail sales on record, in the latest sign of the shifting trends fuelling the decline of the high street.
The Office for National Statistics said the amount of goods sold outside of bricks-and-mortar stores increased by 9.4% in the three months to April, the strongest growth of any quarter since comparable records began in June 1988.
The internet spending boom was fuelled by online promotions and warmer weather over the past three months after the hottest February on record and a sunny Easter weekend.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, rising costs and broader economic problems as well as the coronavirus pandemic. In the past few years names such as Mothercare, Karen Millen, Toys R Us, Maplin and Poundworld have disappeared from the UK high street as a result.
In terms of habits, shoppers are switching to buying online. Companies such as Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying "stuff" as more people live in smaller homes and rent rather than buy. Uncertainty about the economy has also slowed the housing market and linked makeovers of homes. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit and the coronavirus, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high street presence want the government to change business rates to even up the tax burden with online players and to adapt more quickly to the rapidly changing market. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges, which they say put off shoppers. Many businesses which deal with complex supply chains also want additional help with the new red tape and import charges imposed after Boris Johnson's Brexit deal saddled them with extra costs.
What is the government doing?
In the December 2019 Queen's speech, the government announced plans for further reform of business rates including more frequent revaluations and increasing the discount for small retailers, pubs, cinemas and music venues to 50% from one-third. It has also set up a £675m "future high streets fund" under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
Clothing sales were the main driver of growth as consumers updated their spring wardrobes. Online-only retailers make up the majority of sales within non-stores, with fashion items the most popular purchases.
Elsewhere, sales continued to fall at department stores, reflecting the gloom on the high street. Online retailing accounted for 18.7% of total sales in April, up from 17.7% a year ago.
The data comes amid growing concerns for the high street, with major retailers announcing store closures and job cuts over the past year. This week the Topshop owner Sir Philip Green unveiled plans to close 23 UK stores with the loss of 520 jobs as part of a rescue plan for his Arcadia retail empire, which also includes Dorothy Perkins, Miss Selfridge, Wallis, Evans and Burton.
Total sales across the high street and online were flat in April month on month, beating forecasts made by City economists for a drop in sales of 0.3% amid the political turmoil of Brexit – a sign that British consumers have generally shrugged off the uncertainty.
Lisa Hooker of accountants PwC said: “Record temperatures over the Easter weekend definitely got consumers spending, with April sales up by 4.6% versus last year, excluding fuel.
“This is reflected in our own consumer sentiment survey, which showed that confidence had an uptick this spring and has not been dented by Brexit concerns.”
