The past decade has been a phenomenally successful one for the world of ecommerce (otherwise known as online retailing). The growth of sites such as Amazon and eBay is testament to that, while many of the UK’s biggest firms – such as supermarket chain Tesco – have taken to online retail like a duck to water, the same cannot be said of many small businesses.
Overall, retail sales in March fell by 0.7%, but that doesn’t reflect the whole picture. With many famous high street retailers including JJB Sports, Comet and Jessops falling by the wayside, many retail firms large and small are looking to ensure they remain profitable by focusing more on their online operations.
Last month, the Office for National Statistics (ONS) revealed that, in spite of poor performances on the high street, online sales growth stood at 6% compared to February, while year-on-year growth was a much more impressive 29.6%. This statistic highlights more than most the importance of going online, especially during winter when footfall in shops is usually down.
Non-food items less popular
Partly due to the volatile weather which saw much of the UK blanketed in snow, non-food retail sales were sluggish. The biggest area of growth for ecommerce in March was food sales, which saw a rise of 15.8% year-on-year. On the other hand, non-food online retail didn’t perform to well, as the ONS showed that household goods stores saw sales fall by 10.2%.
In response to the mixed news for the retail sector, City Index’s expert Joshua Raymond had this to say:
“It has been a very challenging time for firms selling non-food items at the top end of the price scale, such as electronics. With no major summer sporting event taking place this year either, consumer spending in this space has been handicapped by anaemic wage growth and high inflation.
“With the Bank of England’s newly announced mandate now making it easier for the central bank to look more towards pro-growth measures likely to see inflation rise even further, and there being no major sporting event this summer (unlike previous years), sales of non-food items will rely on faster UK growth and good weather in the UK”, he added.
“To this end, it is firms that have a solid footing in online retail and a low cost base that will succeed.”
One click away
Nevertheless, the fact is that going online can, if managed properly, help to provide firms with another valuable income stream. If not necessarily guaranteeing profit, it can at least help to offset any losses from other parts of a business, but how can SMEs make good use of ecommerce and what are its benefits?
By using ecommerce, small businesses can:
- Increase their customer base by selling to a wider audience
- They make their firms, as well as their online sales department, more easily marketable
- They can reach more consumers who might not have the time nor means to visit a shop or warehouse
- They can compete with rival firms who have already got an ecommerce operation set up
- Give themselves an opportunity to sell more goods in general
Content supplied by City Index and ONS
The Sale of Goods Act (SOGA) hub provides comprehensive and up-to-date guidance on the Sale of Goods Act for retailers and business support organisations.
All the training and promotional materials provided are available to access online or to download in a variety of formats. Business can print and save, add their own branding, copy and paste into existing documents or link to them via the business website or intranet, or share the information directly with members of staff.
The Distance Selling (DS) hub provides guidance for retailers and business support organisation on regulations affecting buying and selling goods and services via the internet, phone, mail order, email, interactive TV or text.
Businesses can use the information and materials on the hub by copying and pasting into existing documents, downloading and printing or by linking directly to their website/intranet.
Both the SOGA and DS hubs offer the facility to register to receive regular relevant regulation updates.
Footfall in February was 0.8 per cent higher than a year ago, an improvement on the 4.6 per cent decline in January. These figures support the recent uplift in retail sales reported by the BRC-KPMG Retail Sales Monitor, where total sales growth reached a three year high. Footfall improved on high streets with a 2.7 per cent increase compared with a year earlier, the strongest growth since December 2011. Footfall in shopping centres (-1.6 per cent) and out-of-town (-1.5 per cent) locations fell; however, this is a significant improvement on January’s figures.
Helen Dickinson, British Retail Consortium director general, said: “This is a respectable result, which tallies with the signs of gradual improvement shown in our February sales figures. Even though overall footfall is only marginally up on last year, the signs are that conversion rates were good. New ranges gave shoppers a spring in their step and end-of-season promotions also proved popular.
“Compared against the widespread regional variations seen in January, it’s really encouraging to see improvements in footfall across the board. However, the link between the number of shops and shoppers is plain to see; the lowest footfall was in the North and Yorkshire, which has England’s highest vacancy rate.
“February 2013 was generally milder than the snow-hit month we saw the previous year, which is a surefire factor behind High Streets posting their best result since December 2011. This is definitely the standout story for February, but it’s only the third time in twelve months that high street footfall rates have edged over zero. Retailers will be hoping that Wednesday’s Budget delivers concrete measures to build on this boost and put more money in people’s pockets.”
Diane Wehrle, research director at Springboard, said: “Footfall on the high street increased annually in February by 2.7 per cent, which is the first annual increase since November last year, and the largest increase in a single month since December 2011. Conversely footfall in shopping centres and retail parks declined annually in February by 1.6 per cent and 1.5 per cent.
“The disparity could be explained by the recent decline in multiples being primarily located in shopping centres and retail parks, with high streets offering a wider diversity.
“The half term week was spread over the last two weeks of the month this year compared with just the third week last year, and whilst the fourth week recorded an annual increase of 2.6 per cent for shopping centres, its benefit was countered by a year-on-year decline of 7.3 per cent in the third week of the month.
“For the high street, one swallow does not make a summer, but these results might hint at the green shoots of recovery, or at least some stabilisation in the current environment.”
The Chancellor can help maintain that contribution by reducing business costs and re-building consumer confidence.
The independent study produced by Oxford Economics for the BRC, shows retailers’ operating costs have increased by a fifth since 2006 and it is centrally-driven costs that have risen most rapidly.
Costs of doing business have shot up by an astonishing 21 per cent – £20 billion – since 2006. That took annual operating costs from £96 bn. to £116bn, according to the latest data. Over the same period retailers sales values increased by just 12 per cent. Cost increases on that scale are forcing store closures and curtailing job creation.
The research also demonstrates that, while many private sector, market-sensitive, costs such as rents, have responded to economic realities, centrally-driven costs such as business rates and utility bills have gone up sharply.
At a time of weak consumer confidence and falling disposable incomes, recent high-profile retail administrations indicate the effect that added pressure is having.
In its submission, ahead of next month’s Budget, the BRC is proposing that the Chancellor helps consumers and cuts business costs to support jobs and growth. We believe the measures needed are:
Support Consumer Confidence Speed up progress towards the target £10,000 per year personal allowance.
Control Central Costs Freeze Business Rates in April 2013, then deliver a system for the future that produces increases that are more affordable and predictable. Using an annual average of CPI, rather than a single month’s RPI, would achieve this.
Apply ‘One In, Two Out’ to regulation and ensure the regulations being scrapped benefit the same sector that is suffering the new rules being imposed.
Apply a ‘growth test’ to new regulation to stop growth-inhibiting regulation.
Preserve and Create Jobs Introduce a time-limited National Insurance holiday for all companies which take on an unemployed young person.
High Streets Provide central coordination on implementation of the Portas Review recommendations. Implement parking performance league tables now.
British Retail Consortium director general Helen Dickinson said: “Retail is a major force for good. It’s the UK’s largest private sector jobs provider and has been a powerhouse for investment and growth, even during the relentlessly tough times of the last few years.
“There were welcome measures in the Autumn Statement and the Chancellor has it within his gift to do a great deal more. Our figures show dramatic increases in operating costs, often as a direct result of Government decisions.
“Consumer spending accounts for two thirds of all expenditure in the UK. It must recover before the economy can, yet 2013 has begun with high-profile evidence that demand is weak and a painful restructuring of the UK retail industry is underway as customers change the ways in which they want to shop.
“The Chancellor has the opportunity to improve the business environment as a way of re-establishing and maximising retail’s essential contribution to recovery. We’re setting out priorities to help achieve that most effectively.”
In January 2013 total Scottish sales increased by 2.1 per cent compared with January 2012, when they had declined by 1.5 per cent. Like-for-like sales increased by 1.1 per cent on last January, when they had declined by 2.6 per cent. Taking account of shop price inflation at 0.6 per cent, January total sales were up 1.5 per cent in real terms.
On both measures, this represented the best growth in 21 months, an upturn similar to the one experienced in the UK.
Total food sales were 5.2 per cent up on January 2012, when they had risen by 2.8 per cent.This was the strongest growth since April 2011. In real terms, food sales were up 1.2 per cent.
Total non-food sales declined by 0.7 per cent on a year earlier when they had decreased by 5.5 per cent.
Fiona Moriarty, director of the Scottish Retail Consortium, said: “After battling consistently tough conditions through most of 2012, this is good news for Scottish retailers.
“The healthier pace of sales that finally developed in December, gathered momentum in January to produce the strongest year-on-year growth since April 2011.
“The fact that New Year’s Eve was included in the survey period this year but not last year boosted January’s food and drink results. Clothing and footwear was the strongest non-food category thanks to winter weather getting people buying boots and stimulating bargain hunting for seasonal clothing. The comparison with January 2012, when sales growth was negative, also helped the overall figures. But, even so, this is an encouraging start to what’s still likely to be a challenging 2013. The key question now is: is this just a blip or dare we hope it signals the start of a lasting revival for customers and retailers.”
David McCorquodale, head of retail, KPMG, said: “January’s sales figures are the best we have seen in close to two years. With like-for-like sales up 1.1 per cent last month, they built encouragingly on the modest progress made in December.
“Total food and drink sales were up 5.2 per cent, with comfort food selling strongly around the New Year, while detox diets provided a boost for fruit and veg sales. Meanwhile Scotch whisky experienced strong demand around Burns night, and homewares, which was the worst affected area last year, also saw increased levels of demand.
“It’s not surprising that non-food sales remained sluggish, given that January is traditionally the month where Christmas debts are paid off. However, retailers generally will look back on successful seasonal campaigns, be relieved that consumers responded well to promotional activity and be glad that they went into the winter with lower stocks.
“It is still far too early to read too much into the figures, but this is a welcome and positive start of 2013.”