Yet again retail has defied expectations to provide a needed boost to the economy during tough times. Official figures from the Office of National Statistics (ONS) record the biggest quarterly leap on record for retail sales with a 17.4% jump in volumes, covering July to September. So what are the reasons for this and what can we expect over the next few months?
Pent up demand
Firstly there was a long way to climb, Consumer confidence has gradually improved since crashing at the start of the coronavirus crisis. Pent up demand was built up during the lockdown phase. While online ate a lot of the physical retail lunch earlier in the pandemic, the fact is it simply couldn’t replace the much larger volume of offline sales. Online retail sales share peaked at 33.4% in May, its biggest share ever. Since then, it has trended back down towards regular levels, which is a boost for traditional retail. However this still represents a real change in the market.
Our ‘stay at home’ habits have also created a sea change in behaviour that has also benefited key retail categories. We have needed to replicate our work settings at home as well as dine more often, entertain ourselves and even teach children in the confines of our four walls. On the back of this, the first half of 2020 saw a resurgence in the PC and tablet markets, peaking at 198m units, and demand continues to outpace supply in certain categories.
Consumer electronics is forecast to grow 3.2% annually through to 2024 with overall revenue expected to reach £9,560m in 2020. A similar pattern is at play with electrical appliances, with more time at home meaning there is more demand.
Shopping with purpose
Of course more time at home means less time in retail. Retail footfall in the UK decreased by 30.1% year on year in September. But while shoppers are making less trips, when they do they are determined to buy something – in other words shopping with purpose. After all, online can’t replace instore in the ‘considered purchase’ category. People still want expert advice before spending on a big ticket item. We are seeing incredible figures on the back of this with conversion rates of demonstrations leading to sales of 37%.
Looking ahead to the Golden Quarter
Looking ahead we also have reason for cautious optimism as we move into the vital ‘golden quarter’. The October Amazon Prime Day signified an earlier than ever “big deals season,” putting Black Friday deal hunters in the mood to shop earlier than ever. This could also have a lasting impact on Black Friday and Cyber Monday, especially if consumers get what they need earlier in the season. Of course online will be a big winner again but while we are seeing new restrictions being put into place – retail isn’t being forced to close. Even in areas with the most heavy restrictions.
Additionally customers are being urged to spread their Christmas shopping across the quarter to ease pressure on the supply chain in the fourth quarter. We are witnessing a lot of evidence that shoppers are beginning their Christmas shopping earlier than ever. Retailers who respond to this can succeed.
The impact of further restrictions
There is a positive consumer trend that even under a return to full lockdown, 55% of consumers say that it would not decrease their spending over the peak period. If regulations allow stores to remain open in a near normal capacity, as has been the case of late, the figure climbs close to 80% of people who would not decrease their spend.
Ultimately the retailers who come out of this difficult period in good shape will be ones who innovate. This will include digital and mobile as part of the experience at the point of purchase and offering a great experience whether online or offline.
Amidst the economic uncertainty we should be proud of the role great British retailers have played during this time.