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Online sales slow as non-essential stores re-open


It is undeniable that the COVID-19 lockdown has had a massive effect on retail and hospitality businesses alike as well as consumers.


During the lockdown, consumer habits seemingly changed to accommodate the new conditions, causing online sales to skyrocket as consumers favoured these methods due to the fact that it keeps them safe at home.


One of these categories were grocery shopping, which was done online in mass during the pandemic as individuals, especially the elderly, had to keep themselves away from high-risk areas.


However, online grocery sales have seemingly slowed down which coincides with a steady increase in the amount of till sales being recorded.


Market research firm, Nilsen, reports that comparing year on year figures, March showed that there was a 92% increase in online grocery sales.


These online grocery sales have decreased to 25% in April, consequently, till sales grew by 4.6%.


The firm reports that the increased consumption within stores is attributed to confidence and is related to the restrictions of the lockdown being slowly lifted in April.


This is logical as lifting the lockdown implies that the UK economy is ready to return back to normality as the health risks associated with COVID-19 have been effectively reduced due to the rigorous vaccination efforts which have significantly improved the UK’s public health.


Because of this, consumers are now much more confident to spend within physical stores.


Mike Watkins, NielsenIQ's UK head of retail insight said that: “As lockdown restrictions ease across the UK, it is clear that shopper behaviours have changed once again with growing confidence and growing numbers returning to stores,” the BBC reports.


If we were to look at overall expenditure, online sales accounted for £1.3 billion whilst in-store sales amounted to £8 billion for grocery stores.


This massive surge in spending has caused supermarket chains part of the “big four” to grow their revenue significantly in recent days with Sainsbury itself reporting that like-for-like sales, which exclude fuel, rose by 11.3% in its fiscal fourth quarter, an increase from its third-quarter where it experienced an 8.6%.


Due to the large boost in consumption which we have seen in recent days, it is logical to assume that the UK has seen an increase in its levels of aggregate demand.


At the same time, the boost in consumption has likely led to a multiplier effect, consumers spend in supermarkets, these supermarkets see an increase in their profits so they organically expand to make more profit thus increasing investment spending, then, these increased profits may be taxed by the government with corporation taxes which will then be used to increase government spending by a smaller margin than investment spending.


In other words, this consumption boom is the exact ingredient which the UK economy needs to move forward and bounce back into normality.


And it is highly likely that the UK will boom as during the pandemic consumers have saved record amounts.


So, consumers are eager to spend their lockdown savings, especially on luxuries, for this reason, the economic bounceback of the UK will be significantly amplified.


Additionally, credit card spending was up 25% which puts it almost at pre-pandemic levels, so, consumers are spending their own money and money they don’t have, thus showing that they are extremely confident in their job security as they feel safe enough to acquire debt.


Hence, the trends of consumers and businesses alike are pointed to one clear outcome, and that is that we will see growth in the coming quarters, will it be sustained growth? That will depend on if consumers splash all their cash in one quarter, looking forward we can only hope that the vaccination effort has been good enough to ensure that any growth done in the coming months is not undone.

 

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Written by Hubert Kucharski

Research compiled by Billy Ryan.



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