Analysis: what the latest ONS retail sales figures tell us

Shoppers have continued to increase their spending, with the amount of products bought increasing for the fifth consecutive month in September, according to the Office for National Statistics (ONS), however for fashion retailers (particularly those with many physical retail stores) the picture is not so positive.

Physical fashion stores continue to struggle and could miss out further as restrictions limit the Christmas party season will suppress demand along with the renewed call to work from home if possible. Food and DIY remain popular and the shift to online orders saw 27.5% of sales taking place online, compared with 20.1% in February.

Overall growth in sales volumes – rather the amount spent – was up 5.5% compared with February’s pre-pandemic level, the ONS added.

Food sales increased with fewer households eating out and non-food stores’ sales were above February levels by 1.7%. Supermarkets are expected to benefit further from new local restrictions hitting pubs and restaurants hardest.

In the three months to September, retail sales volumes increased by 17.4% compared with the previous three months, in the biggest quarterly increase on record.

Fuel sales volumes remained low, down 8.6% from February with reduced travelling, and clothing sales volumes remained 12.7% below pre-pandemic levels.

DIY and home improvement sales continued improving as families updated their homes, the ONS said.

Helen Dickinson, chief executive of the British Retail Consortium, said: “The retail recovery remains fragile as the industry enters the all-important Christmas period, with November and December typically accounting for over a fifth of annual sales.

“While food and online retail continued to show strong growth, high street shopping has struggled in recent months, with footfall still down by over a third.

“Tighter Government restrictions have taken their toll on fashion and beauty sales, while home office and computing equipment has benefited.”

The BRC is encouraging consumers to begin their Christmas shopping early to avoid over-crowding in stores and placing too much of a burden on retailers' and etailers' logistics in the run-up to Christmas.

However, as the analysts who offered their views below point out, consumers will be well aware that the high street is struggling and will be aware that retailers will start to offer discounts earlier too, so are likely to hold out for those.

Oxford Street, October 2020

What the analysts say

Richard Lim, chief executive of Retail Economics:

“Growth in retail sales is beating even the most optimistic expectations.

“Consumers have proved extremely resilient as cancelled holidays, fewer trips out and less commuting have boosted discretionary spending power to the benefit of some parts of the retail sector.

“Christmas 2020 is going to be like no other and we’re also likely to be seeing signs of consumers starting their Christmas shopping earlier.

“It’s not hard to imagine scenes of queues outside of shopping centres (limiting shopper numbers), queues outside shops, queues inside shops and frustrated shoppers.”

Karen Johnson, Head of Retail & Wholesale at Barclays Corporate Banking:

“Whilst we might be entering the colder months of the year, this latest set of results suggests the UK retail market is yet to feel the chill. Consumer demand has driven an increase in retail spending, and online channels have been the biggest beneficiary of this – as local restrictions due to the pandemic mean more and more people are choosing to shop remotely.

“Looking ahead, we can also expect to see an acceleration in typical timelines for festive shopping. Concerns about further lockdowns, stock levels and the availability of popular items will all serve to drive consumer spending patterns – and many in the industry now predict that October and November could be the peak months for winter retail.”

Ian Geddes, head of retail at Deloitte:

“Retail sales in September rebounded beyond pre-pandemic levels, as both month-on-month values and volumes recovered to 1.4% and 1.5%, respectively. September’s figures will be a welcome boost to retailers that continue to navigate through the ongoing COVID-19 pandemic. Despite a tumultuous six months, September’s sales also mark a year-on-year improvement, up 3.4% by value.

“In a month where workers returned to home workplaces and consumers were no longer ‘eating out to help out’ under the government’s scheme, grocers have reported strong food sales, up in value both month-on-month (0.5%) and year-on-year (6%). Likewise, many consumers found themselves subject to new, localised lockdown restrictions in this period, and we can start to see a small uptick in food sales.

“Non-food sales saw some month-on-month growth, up 3.8% in value, recovering to beyond February’s pre-lockdown levels, as the start of the academic year helped maintained growth, with pupils headed back to school and students re-embarking on university life. Similarly, as consumers continue to spend more time at home and transition to more permanent remote working arrangements, home improvements and home office space creation has been a driver of household and furniture sales.

“Online trade, whilst slowing by -1.2% this month, remains 53% above year-on-year comparables, with web orders accounting for 27.5% of overall retail sales. As the nine-week countdown to Christmas begins, retailers will be keen to maintain online momentum and ensure distribution can continue to cope throughout the festive season. As a result, we may see earlier-than-ever discounting from retailers, enticing consumers to spread out their Christmas shopping and thereby stage demand over a longer, more manageable period. For some retailers, Black Friday will be an important supply chain ‘dress rehearsal’ for an increasingly online Christmas.”

Mark Lynch, Partner at Oghma Partners:

“While these figures highlight British stoicism in supporting a fragile economy, it is important to note that these retail sales figures might be slightly misleading in terms of giving an impression of the strength of the consumer economy as a whole. UK shoppers have been buying more food and drink at supermarkets because they have been spending less on eating out.

"The Government’s lockdown restrictions have re-emphasised earlier trends that we saw around Spring which showed positive sales growth for direct to consumer and supermarket companies. We have already seen a significant shift in consumer behaviour which has boosted growth for those companies in Q2 and to a lesser extent in Q3 but which now look to boost growth again in Q4."