It is not difficult to be puzzled about the performance of the UK retail market in December 2011. A headline in one of the national papers reads ‘Retail sales Dazzle in December’, while at the same time, Morrisons report flat sales (0.7% comps) for the period. Morrisons has been a poster child for the sector since management changes a few quarters ago, and yet this does not look like a dazzling performance. Some sectors are clearly in difficulty. Game reported UK and Ireland sales down over 13% and woes at HMV continue as they have for most of last year. However the overall figures for food are said to be a driver of the 2.2% growth achieved on a like for like basis. To decide whether this means a return to growth for the sector it is worth looking at the results in detail.
The commentary from Morrisons is that it had more customers coming to stores, but that the customer were spending less. This decrease in spend was a combination of volume – one item less per basket, and value as consumers cut back. To support this management said that champagne sales were down while sparkling wine sales were up. This does in seem in line with the anecdotal evidence and with commentary across the economy.
You also need to strip out other factors when looking at the results. Our lead retail marketing consultant points to three other factors not generally looked at in the press coverage of the figures:
1 The rise of online shopping
Online sales were up 18% in the period. Against a background of shoppers cutting back, this can only mean that stores are losing out to e-commerce. Although this does not always affect food sales as much as other categories, it will play a part.
2 The weather
Last year we had a lot of disruption due to snow in December and that did impact food sales in that period. The mild weather in 2011 will have flattered its sales data.
3 Sales days
The way that Christmas fell this year was very helpful for retailers, with an Christmas Eve on a Saturday when most people as off work. This gave retailers another selling day and this will have also boosted sales.
When you strip out these one-off factors, then the growth rate of 2.2% looks encouraging, but more on trend with the rest of the second half of 2011. So the picture is likely to remain one of constrained consumer spending, continued discounting and bargain hunting and the relentless growth of online shopping at the expense of traditional channels.