talkingtrade Unknitting a sock
ConsultantMichael Weedonattempts to unravel the conundrum of our shiſts in retail spending
I
’m still asking myself how much stuff is sold online in the UK (and still searching for part of the answer). Is
everythingnow sold online? If it is, why are there any shops at all? If it isn’t, will there be any shops eventually? ‘Online retailers hit £8.4 billion as
m-commerce drives sales’ ran a recent headline to an article based on data from professional services firm RPC. Sounds like a lot. But is it? We have been up and down this e-high
street before, trying to answer questions about how much of UK retail actually goes through online sales channels, and the answer is becoming a bit clearer as time passes – but the answer isn’t £8.4 billion. It’s more - much more. But how much more? According to fresh figures from the endlessly
informative ONS (Office for National Statistics), we consumers spent £365 billion last year (excluding the £40 billion we shelled out on fuel for our cars, of which I seem to have paid about half ). That’s a neat billion quid a day. For every £100 we spent in 2017, £40 went
on food and drink (for home consumption, not in restaurants), £42 bought us things that we couldn’t eat but found some use for ie non- food, £9 was poured into car fuel tanks and another £9 was spent with “non-store retailers”. That all takes a bit of unpacking. The food
figure is actually cash spent in “primarily food stores”; non-food is money in the tills of “primarily non-food stores”. Fuel is fuel for cars, and “non-store retailers” includes everything from market stalls and door-to-door selling to mail order catalogues and pureplay (online- only) shops. What the last one does not tell us is whether
these “non-store retailers” flog food or non-food – but we can make some guesses. Somewhere in all of that is information about online sales. Working out exactly how much is a bit like unknitting a sock and trying to end up with a neat ball of wool. Now it seems obvious that online petrol
sales are unlikely to add up to, well, anything - if only because of the difficulty of delivery - so we will ignore that, again. Supermarkets also sell some non-food, and some sell tons of clothes and some housewares, but mainly they sell food. ‘Non-food stores’ sell some food, but mainly they don’t, they sell things and stuff. Helpfully the ONS tells us how much within
each of those broad divisions it thinks is sold online: where food shops sell some product online, for example. We are never going to know exactly what the split is, but we can work with the broad divisions. Across the whole spend, the ONS reckons
that a squeak under £60 billion was spent online last year. That’s just over 16% - one in six pounds spent (remember that we are ignoring fuel). As that leaves five in six pounds in the tills of shops or shops plus ecommerce, that explains why there are any shops left on our high streets at all. In fact the ONS produces a lovely series
which shows how the pounds going through tills have continued to grow through the past decade. Online sales made by both pureplays and bricks-and mortar-shops have grown faster and nicked most, but not all of the growth. Allowing something for inflation, it’s probably fair to say that volumes in shops have been fairly static for 10 years, but have not fallen overall. What that doesn’t tell us is what type of
retailer is making those sales: online-only or multichannel. Many would assume that the bulk of the business is in the hands of pureplay operators. Many would be wrong. For most of the past decade, online sales by
shops have outstripped those of pure online businesses, but not by a lot – it has been more
or less a 50-50 split. That, however, switched over in 2016 and pureplays have a bit of an edge at the moment. Maybe this is due to the continued development of smartphones for sales and last-mile delivery logistics in vans. What it does tell us is that retailers with
both shops and online sales channels have been, and continue to compete, with the pureplay operators. In 2017, one in 12 pounds was spent with
online-only retailers, and about the same ended up in the tills of shops plus online sales. To put all of that another way: 11 out of 12 pounds spent still goes to retailers who have shops, through one or other of their sales channels. The great unknown is the split between food
and non-food spending within the £30 billion non-store segment. It would be helpful to know this, because online spend is not split equally between food and non-food spending through shops, so online is probably not either. The £8.4 billion spent with the top 20 online
retailers includes the turnover of ASOS, Shop Direct,
AO.com and
MADE.com: all “primarily non-food” retailers. So there is every reason to believe that these are in the non-store segment of the ONS figures. The only obviously full-on “food” retailer in this segment is Ocado, with a turnover in 2017 of just under £1.5 billion. Amazon does sell food, but is not
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March/April 2018
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