July 29 2008

How will online fare as retail sales see biggest fall for 22 years?

The Office for National Statistics has just reported the biggest drop in retail sales for two decades. Could the high street's loss be online's gain, or will the crunch just take a little longer to hit the homepage than the high street?

The credit crunch is more than beginning to bite on the high street. Between May and June this year, the Office for National Statistics reports that retail sales volumes fell by 3.9%, the largest drop since records began in 1986.

Meanwhile, over half of UK companies now say they plan to cut jobs and the first retailer casualties are beginning to appear.

In the online sector, 247electrical's Dominic Yacoubian believes he's seeing a sea change in the way that online shoppers are doing their bargain hunting. "While business remains robust at 247electrical — one of the UK's leading online retailers — the company has seen a significant (30 percent) fall in the number of referrals from the established price comparison sites despite offering the lowest deals on many goods," Netimperative reports.

David Bird of MMU Business School is not so sure, though. "I wonder if a 30% drop in traffic is more symptomatic of a drop in people spending money whilst they remained concerned about a recession," he muses in his blog. "I wonder if people just don't want to buy anything right now — bargain or not."

Analysts have been quick to point out that the huge month-on-month drop in June sales reported by the ONS is rendered less significant by the fact that it follows a very strong May, which seems itself to have been driven only by the late arrival of warm weather. "The scale of June's month-on-month fall in sales volumes was partly explained by the unexpectedly high growth recorded the month before," says Stephen Robertson, director general of the British Retail Consortium.

"But these Office for National Statistics results show conditions remain tough for customers and retailers," he continued. "These figures show the total value of sales in June was up 3.4 per cent on a year ago. But that is a real terms fall and conceals a tale of two sectors with growth mainly driven by increases in some food prices rather than any new willingness to spend on non-essentials."

by Sarah Clark (Web Editor)