Online sales finally reach equilibrium, while High Street stumbles

Today’s ONS retail figures show online shopping held on to its 26.4 per cent market share in September – roughly where it has sat since May. Online sellers can now plan ahead, but it’s still carnage on the High Street, says ParcelHero.

Online sales peaked at 37 per cent of the entire retail market in February 2021, during the height of Covid lockdowns, but then started to fall back. How far they would fall before reaching a new equilibrium is a question retailers have been asking for months. ParcelHero says today’s Office for National Statistics (ONS) retail figures show online sales have now stabilised.

“For a long time, retailers have wondered what the ‘new normal’ for retailing is. Now we seem to have our answer,” said ParcelHero’s Head of Consumer Research, David Jinks M.I.L.T. “For much of this year, online sales have held on to around 25-26 per cent of the overall retail market. While that’s far from the giddy heights of 37 per cent in February 2021, it’s still well above the 19 per cent online was averaging before the pandemic hit in March 2020.

‘Unfortunately, it’s not terrific consolation for specialist online retailers such as ASOS who overexpanded during the pandemic. This month, it revealed its annual profits have fallen by -105 per cent, leading to a significant £10m operating loss. In contrast, last year it made a profit of over £190m. However, at least retailers now know where the bottom is and can plan accordingly.

“High Street retailers, however, are still having a torrid time, which won’t be helped by the tumultuous changes at the top of Government. Consumer confidence is clearly faltering. Retail sales overall fell by -1.4 per cent in September 2022 and are -1.3 per cent below pre-coronavirus February 2020 levels.

“Rising prices and the cost of home energy bills are the chief reasons for the fall, as shoppers drew in their horns to prepare for an expensive winter ahead. Even more concerning for retailers, most of the period covered by these latest ONS figures date from before the former Chancellor’s disastrous mini-budget of 23 September. This will have undermined consumer confidence even more and further increased the price of goods.

“Perhaps the most telling figure is the comparison between September 2022 and September 2021. Even though people spent 3.8 per cent more this September, the quantity of items they bought fell by -6.9 per cent compared to last year. In other words, it cost us significantly more to buy significantly less. That’s the impact of rising inflation.

“One mitigating factor was that the Queen’s funeral took place in September, which lost most High Street retailers a trading day. However, this additional Bank Holiday is unlikely to have changed these results in any fundamental way.

“Returning to online figures, a year-on-year fall of -8.2 per cent in the value of sales shows why online-only retailers such as ASOS are now feeling the pinch. However, September’s results were actually up 1.2 per cent month-on-month, highlighting the fact that we now seem to have reached some kind of stability.”