Retail sales slump further 8.2% in January according to ONS

retail covid

The high street’s struggles have continued into 2021, after the Office for National Statistics (ONS) released its most recent data.

According to ONS, UK retail sales tumbled 8.2% in January from December, and total sales were down 5.5% when compared with January 2020 – largely down to the third coronavirus-enforced lockdown.

However, during the same time period, online spending surged 35.2% – the highest on record. Supermarkets and other food stores reached record high sales of 12.2% of online sales.

In total, the value of UK retail sales collapsed 7.8% in January compared to the previous month, December 2020, and 7.2% YOY.

Industry reaction

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

Sales have fallen off a cliff again, with the lockdown in January proving even more punishing for retailers than the November restrictions. After the Christmas splurge, consumers who did have cash to splash were clearly battening down the hatches, and squirreling rather than spending. With the economic outlook bleak given the rise in unemployment expected, building up financial buffers is a prudent course of action, but still a difficult pill to swallow for struggling retailers.

It’s no surprise that as non-essential stores on the high street were forced to close yet again, online spending surged to 32.5% the highest level on record.

With independent stores facing the chill of sustained lockdowns while the digital marketplace platforms clean up, this is likely to add to the clamour for a tax to be brought in for online sales and for a sliver of those profits to be redistributed. Local authorities are faced with what is likely to prove an expensive dilemma of how to revitalise town and city centres, now that the collapse of some big names have left huge empty shells behind. If such a levy was to be brought in, they will be trying to be first in the queue for financial support to help with that tricky transition.

The scale of the accelerated shift to digital sales over the course of the pandemic has been brought into sharp focus by the sharp difference in fortunes experienced by companies at either end of the retail spectrum.

Even though the share price has fallen back since the start of the year, online electrical retailer AO World has still been the best performing London listed company in the retail sector, seeing its shares rise by more than 305% since February last year.  WH Smith has languished at the bottom of the retail heap, with its share price down by 30% over the year. The company had become highly reliant on its convenience shops dotted across the transport network. But this captive market, where shoppers made impulse purchases all but evaporated during the pandemic. As our demand for e-commerce and parcel deliveries has soared, that’s boosted the share price of previously unloved stocks like Royal Mail which has seen a share price rise of 165% over the year.

ParcelHero’s Head of Consumer Research, David Jinks MILT

The ONS retail figures for January show that the volume of goods bought last month collapsed -8.2% compared to the preceding month, as Lockdown 3 shattered retailers’ hopes that traditional January sales would lead a High Street comeback.

The amount of goods sold was also down -5.9% compared to January 2020, just before the beginning of Lockdown 1. Clothing stores were the main driver behind this collapse, with monthly declines of -35.6% in the amount spent and -34.7% in the quantity bought.

These are grim numbers for retailers and, even when this supposed ‘lockdown to end all lockdowns’ is finally over, the High Street will be a very different place. Topshop, Dorothy Perkins, Burtons, Miss Selfridge and Wallis are among the long rollcall of casualties who won’t be reopening their doors again when the shutters finally go up across Britain.

It’s no coincidence that these once dominant High Street stores are moving to online only. Once again, online sales helped shore up spending and avoid complete retail meltdown. Online sales hit a record high, seizing over a third of the entire retail spend, ballooning by 72.7% compared to January 2019, with all non-food store sales up 90% YOY and online household goods sales up 110.1% YOY.

As big-name High Street fascias disappear, it will be up to indie stores to fill in the gaps and restore the fortunes of our town centres. That’s why it is vital that the Government gets its roadmap for ending lockdown right.

Non-essential stores will not survive a fourth lockdown; they need to know this will be the final one. That is the only way they will be able to plan confidently for the future. It’s vital the Prime Minister stands by the pledge he made earlier this week: “We want this lockdown to be the last. And we want progress to be cautious but also irreversible.

Of course, supposedly ‘non-essential’ indie stores also need to rapidly expand their online offerings, to complement their physical stores. As today’s ONS figures highlight, a strong web presence is crucial for their survival. That’s why online clothing sales managed to grow 48.9% despite the huge slump in fashion sales on the High Street.

Ironically, a new tax supposedly aimed at saving town centre stores may drive the final nail into their coffins by slashing their online sales. It’s widely believed Chancellor Sunak will reveal details of an ‘Amazon tax’ in his Spring Budget next month. This could add as much as 2% to the cost of all online retail sales.

The Chancellor should not make UK’s beleaguered online shoppers and indie stores pay the price for lost business rates income. The new tax would hit shoppers and remaining retailers alike. Those High Street outlets that find ways to survive must have websites as well as physical stores. A new online sales tax will leave most retailers paying a second raft of taxes.