Deloitte comments on ONS retail sales

Commenting on today’s ONS retail sales figures, Oliver Vernon-Harcourt, head of retail at Deloitte, said:

“May’s washout weather put a dampener on overall consumer spending as month-on-month sales values and volumes both dropped slightly, -0.8% and -1.4%, respectively. Despite the decrease, post-lockdown pent-up demand continues, and spending remains higher than pre-pandemic levels.

“The relaxation of indoor dining rules, and enthusiasm for dining and drinking out, drove consumers away from food stores with food volumes falling the most in May (to -5.7%). However, sales of non-food items have remained buoyant, with garden furnishings, and toys and games amongst the most commonly found items in consumer baskets.

Rise of the ‘hybrid’ consumer

“Following a full month of non-essential shops reopening, many consumers continued to visit their local High Street in May. This is likely down to the fact that many remain working from home, but also heightened awareness of supporting local businesses.

“As consumers returned to stores and spent in more discretionary categories, online-only retailers and in particular grocers saw slower sales growth in May. Longer-term, this could be the first sign of consumers reverting back to some pre-pandemic habits. However, some behaviours adopted during the pandemic are likely to stay, with the baseline for online as a total share of retail, whilst slowing to 28.5% in May, likely to remain substantially higher than before the pandemic. The value of online sales is currently outperforming even lockdown levels, demonstrating an entrenchment of some behaviours. This is especially true of clothes purchasing, as consumers switch to trying items on in the comfort of home.

“Retailers will be keeping a watchful eye on online sales as national restrictions are lifted fully. The economics of trading online is becoming more profitable as the value of retail sales online was significantly higher (58.8%) than pre-pandemic (February 2020). This compares to lower in-store value of sales, which fell by -1.3% over the same period. Retailers will continue to invest in their online presence to serve the emerging ‘hybrid’ consumer; those who wish to shop seamlessly between in-store and online.

Price rises on the horizon

“For those consumers who were able to accumulate lockdown savings, there is certainly evidence of them spending now and playing a part in the recovery. Whether this level of spending will be impacted, following the extension of restrictions, remains to be seen.

“The arrival of hot weather so far in June and the kick off of the postponed Euros could also boost sales in televisions and, in food, game time drinks and snacks. Economists are, however, warning of clouds on the horizon in the form of inflation and, consequently, price rises. Until then, consumers are making hay whilst the sun shines.”

-Ends-

Notes to Editors

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