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UK online clothing sales to overtake high street sales in 2022

Tom Bottomley
01 November 2021

UK online apparel sales will overtake high street sales in 2022 - three years ahead of pre-pandemic predictions, and the UK will be the first in Europe’s biggest retail markets for it to happen.

A dramatic shift in UK consumer spending over the pandemic will leave high street apparel stores with a £14.5bn hole in sales by 2025 if changes are not made, according to research by Retail Economics commissioned by global law practice Eversheds Sutherland.

The new report, called "The Future of the European Apparel Industry", says the industry “needs reform beyond business rates reductions” to prevent such a hole, with Eversheds Sutherland’s policy recommendations including attracting high-spending overseas consumers, retail visa reform, Sunday trading changes and the return of tax-free shopping.

The research contains insights drawn from a nationally representative consumer panel across four key European markets, the UK, France, Germany and the Netherlands. The sample comprised more than 4,000 households (1,000 in each market) with survey data collected in August 2021.

It found that UK retailers will be the first across some of Europe’s biggest retail markets to make the majority of sales via online, with 52% of all transactions set to occur online in 2022. The Netherlands is predicted to follow next, moving to 52% of sales going online in 2025, with others analysed not hitting the tipping point until beyond 2025.

While UK online sales during the pandemic increased by £2.7bn, or 19%, in 2020 versus 2019, that wasn’t enough to prevent an overall drop in apparel sales for 2020 of £9.6bn.

The pressure is on apparel retailers to pivot their business models and adapt to the new reality. The report says that if retailers are to be successful in capturing consumer attentions and driving growth online, the purpose of stores will need to evolve.

James Batham, Partner and Head of Retail and Leisure at Eversheds Sutherland, commented: “Over the pandemic we saw the switch to consumers buying online accelerate. As lockdowns lasted for longer, and companies invested in the digital and logistics infrastructure to service demand, buying online stopped becoming forced and started becoming many people’s preferred method.

“Now that consumers can return to the high street we can see that buying online has become a habit, and this change of habit means the way we think about high street retail has to evolve. The industry needs a transformation in planning, policy and skills to avoid billions of pounds of sales and thousands of jobs being lost. Retailers will have to alter the way they use commercial real estate and the customer experiences they deliver. They have to bring people back to the high street, and not just from across the UK, but from across the globe.”

Batham pointed out that whereas reforming business rates is well debated, removing the friction of shopping in the in the UK for overseas consumers is not.

He added: “Exemptions for international shopping areas have been discussed for London, but what about in tourist hotspots across the UK? Reform on shopping visas, Sunday trading and tax-free shopping are highly likely to generate more revenue through sales for the government than they will through tax. These no-cost options should be considered as the UK looks to establish itself as an international retail market outside of the EU.”

As lockdowns came into force across Europe, store visits plummeted, and the research found that more than a third of consumers in the UK (35%) will not return to stores with the same frequency as they did before Covid-19. That was the largest percentage across the countries surveyed, followed closely by France (27%), then Germany (25%) and the Netherlands (24%).

The millennial generation is at the forefront of that change, with 34% across Europe and 44% in the UK saying they have changed their shopping habits permanently.

In the UK, the report estimates that the shift to online will result in apparel store-based sales losing an average of £3bn a year compared to pre-pandemic projections. Across the four European countries combined, average losses of £6.8bn in sales per year from 2021-2025 are expected. That is compared with a scenario where Covid-19 does not impact consumer behaviour.

Richard Lim, Chief Executive of Retail Economics, said: “The pandemic-induced shift to online and subsequent impact on store-based sales has magnified the urgency for retailers to adapt. Physical stores must be reimagined and repurposed to meet the needs of an increasingly digital-centric customer journey, becoming a powerful driver of online sales rather than competing against them.

Stores will play multiple roles to become much more than a point of transaction. Some stores will function as immersive showrooms or ‘brand-bonding’ centres where customers can discover and interact with products, while others will operate as convenient fulfilment hubs geared towards click-and-collect and returns. Either way, the continued fusion of physical and digital realms will be key.

“Fewer stores are inevitable, but those that are left will be a much better fit for the future. When executed correctly, physical stores can become powerful customer acquisition tools, complementing online channels whilst simultaneously offering unique and meaningful customer experiences that strengthen brand loyalty.”

Furthermore, the reports says that the ability to touch, feel and try on products are the most important aspects of shopping in-store for 68% of consumers, suggesting sensory shopping experiences are needed. That is most important for Gen X (70%) and baby boomers (75%) and 30% of all UK consumers say they have bought clothing online following a visit to a store.

Greater digitalisation is encouraged with two thirds (66%) of UK consumers saying they are likely to use in-store tablets or other interactive digital screens to be able to browse and order online with a retailer while in-store.

Stores as distribution hubs is found to be effective with almost a quarter (39%) of UK consumers saying they are more likely to visit an apparel store if it offers free click-and-collect and returns. That percentage increases in UK millennials, with 49% saying they would be more likely to visit an apparel store if it offered free click-and-collect.

Creating a personalised shopping experience is vital with 35% saying personalised shopping experiences, such as personal styling or bespoke product recommendations, are more likely to make them visit a store.

The report also explored the next generation of consumers. It found that generation Z (16-24) in the UK is much more influenced by experiences, personalisation and ethics than other age groups.

More than a quarter (31%) of UK generation Z consumers say personalised shopping experiences, such as personal styling or bespoke product recommendations, are more likely to make them visit a store. That’s compared to 15% of millennials and 16% of baby boomers.

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