Light at the End of the Tunnel for the UK’s Shops, Following Record Plunge in Retail Sales in April

– Record slump in retail sales in the UK
– Online sales take up some of the main street's losses
– But "light at the end of the tunnel" says no industry expert

Retail sales hit a record high

Image © Adobe Images

The UK economy saw an 18.1% drop in retail sales in April, a record collapse, but this is hardly surprising given the extent of the government-enforced economic shutdown to stop the spread of Covid-19.

The drop in retail sales was greater than expected by the markets, as an economists' survey showed that a decrease of -16% from the previous month was expected.

The record decline in April followed a decline of 5.2% in March, making sales 22.3% below the level before the corona virus in February.

Apparel sales decreased 50.2% month-on-month, while gasoline sales decreased 52.0% month-on-month.

"All of this comes at an already precarious time for the UK's main road. The pound's sharp depreciation and a prolonged period of subdued consumer confidence after the 2016 referendum had hit demand in recent years, while retailers faced combined cost pressures from successive increases of the minimum wage and more recently by building inventory around the Brexit deadlines, "said James Smith, Developed Markets Economist ING bank.

Since the main street is practically closed, it's understandable that consumers turned to online sources. This was reflected in an 18.0% increase in online sales compared to the previous month. The total share of Internet sales is 30% of total sales, an increase of 22% in March.

Retail sales charts "width =" 750

Above pictures courtesy of ING Bank.

On the outlook, Paul Dales, chief economist for the UK, has contributed Capital economy According to April, April was probably the lowest point in retail sales as some stores were partially reopened in May. Capital Economics estimates that consumption in the second quarter of 2020 could decrease by 25% compared to the previous quarter, which would be a little better than the originally expected decrease of 30% compared to the previous quarter.

"Retailers have never seen such a dramatic drop in sales before, but at the end of the tunnel there is light when the government announces that non-essential retail stores can be provisionally reopened in June," said Lee Lucas, principal and CEO of Fashion Retail Academy. "With the summer vacation abroad not going as planned, fashion retailers could be the unexpected winners of the greatest stay in Britain that Britain has ever seen."

After months of suspension, Lucas says, "Customers will have a chance to enjoy familiar activities again, and that includes bringing a little retail therapy back into their lives."

Retailers had to close their doors in March as the government stepped up efforts to curb the spread of Covid-19, marking a time of unprecedented uncertainty for the country's retail stores.

However, there was an increase in demand in grocery stores as consumers had stocks in anticipation of the block, which may have been somewhat flattering to the April data.

After the surge in supermarkets eased in May, the whole sector slumped. However, some retailers reopened in May, and garden centers and hardware stores opened their doors again.

Further restrictions are expected to be relaxed at the beginning of June, which should enable a further revival of sales.

"The announcement that June could mark a turning point has given them the goal of focusing on work practices and, above all, changing time to comply with social distancing policies and to ensure that businesses do improved health and safety measures be operated, "he says Lucas.

However, ING's Smith is less optimistic about the UK retail outlook and notes that the majority of its sales still take place in the traditional high-street environment.

"While the balance re-opens to some extent when the stores reopen, stores may not open at all in many cases. According to the Local Data Company, store openings have been steadily decreasing since 2015, while closings have been down year on year Around 14% have increased The vacancy rate in retail has increased in recent years and we expect this trend to only accelerate, "said Smith.

According to ING, the success of the traditional retail sector will be caused, but the lockout will only reinforce the trend away from physical retail that we have seen in recent years.

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