The month of December proved to be disastrous for the UK retail sector, as the Omicron variant and inflation wreaked havoc on sales. The Office for National Statistics (ONS) released retail sales figures that painted a bleak picture, with retail sales volumes plummeting by 3.7% in December and the value of spending down 3.1% compared to the previous month. Even more concerning was the year-on-year decline of 0.9% in volumes, although the value of spending showed a 5.7% increase, highlighting the significant impact of inflation.
The decline in sales was particularly disheartening considering the cancellation of many Christmas celebrations in late 2020 due to Covid-19 restrictions, making the year-on-year dip in 2021 appear even worse.
However, there were some positive updates amidst the gloom. Sales volumes were actually 2.6% higher than pre-coronavirus levels in February 2020, with the value of spending showing a substantial increase of 7.6%. It is important to note that these numbers were partly influenced by inflation.
The most concerning aspect of the ONS report was the decline in non-food store sales volumes, which fell by 7.1% in December 2021. All sub-sectors, including department stores, clothing stores, other non-food stores, and household stores, experienced declines in sales volumes following strong sales in November. Clothing stores and department stores saw the most significant declines, with a volume fall of 8% and 6.3% respectively over the month, and were even 7.2% and 10.6% below February 2020 levels.
The rapid spread of the Omicron variant in December noticeably impacted retail footfall according to some retailers. The proportion of retail sales made online rose to 26.6% in December, a substantial increase from the 19.7% in February 2020 before the pandemic. David Jinks, Head of Consumer Research at ParcelHero, highlighted the challenging situation faced by retailers during this period. He noted that as awareness of the rapid spread of Omicron grew, consumers abandoned physical stores but didn’t turn to online shopping in significant numbers. This could be attributed to the fact that many shoppers had already made their purchases in November to avoid Christmas delivery delays and crowded stores.
The combination of the Omicron variant and inflation posed significant challenges for the UK retail industry in December. Despite some bright spots, such as sales volumes surpassing pre-pandemic levels, there was an overall decline in retail sales. The rise in online sales further emphasized the growing preference for e-commerce, especially during times of uncertainty. Retailers will need to adapt their strategies to cater to changing consumer behaviors and find innovative ways to attract customers back to physical stores. Despite the obstacles faced in December, the industry must remain resilient and look for opportunities to drive growth in the future.
Useful links:
– FT: UK retail sales slump in December as omicron and inflation weigh
– BBC: UK retail sales fall sharply as Omicron bites
