Retail: Summer sales signal start of swing to online

Retail: Summer sales signal start of swing to online


The newly released retail sales figures from the Office of National Statistics (ONS) make for familiar reading, not so much for the figures themselves, but for the for underlying factors at play.

The big news is that August sales bucked the expectations of analysts to grow 0.3% off the back of a strong performance by the household goods industry. This was despite the early summer heatwave and the World Cup – which were expected to precipitate a retail slow-down – and lower sales of food and drinks.

Also credited with playing a part, though, is the continued growth of online sales. A 14.2% year-on-year increase brought them to an 18.2% slice of all retail sales, which is a new record. Month-on-month, online sales grew at 0.7%.

It has consistently been postulated that rising online sales would ultimately lead to falling in-store sales and, until now, that had yet to materialise. But, despite the 2.3% growth of in-store sales year-on-year to August, the ONS suggests things may be about to change.

“Online sales have shown a steady increase since 2008, but have really set off in the last three years, as online spending increased at a faster rate from 2015. This has coincided with a slight slowdown in store spending, which shows the beginning of a shift in consumer behaviour to spending more online.”

This is significant. Although bricks and mortar sales still account for about 82% of total retail sales, a slowdown in growth for this reason would be a flag in the sand for the maturation of the online market. In short, when in-store sales begin to slow at the expense of online sales, retailers need to be ready for a shift in focus.

The need for retailers to have any online presence is not news, of course. Indeed, our own data shows the impact it has, with the annual sales of e-commerce companies growing twice as fast as other retailers (15% vs. 7%).

A shift away from in-store sales, though, albeit likely over a long period, means that online becomes the front-line – and that means retailers need strategies to match. The question is this: what separates the most successful online retailers from the rest? The answer: artificial intelligence (AI).

Businesses using artificial intelligence (AI) are growing 30% faster than those that are not. It increases profit margins by 50% and improves inventory stock days by 9%. As e-commerce gradually begins to reverse bricks and mortar domination, these figures will become ever more stark and ever more significant. Retailers need to be on the right side of the slide.

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