Ross Clark Ross Clark

The online shopping boom is well and truly over

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So much for ‘dry’ and ‘no buy’ January. The UK public seems to have thoroughly rebelled against efforts to persuade them to work off the excesses of the festive season. In particular, we seem to have stuffed our faces somewhat.

The retail sales figures put out by the Office for National Statistics (ONS) this morning show that the volume of sales in food stores rose by 5.6 per cent in January relative to December. That helped overall retail sales volumes to rise by 1.7 per cent, compared with a 0.6 per cent fall in December. Chancellor Rachel Reeves has good reason to feel relieved. Until a week ago it seemed as if Britain was heading for a recession. That looks a lot less likely now that retail sales seem to have picked up and last week’s GDP figures suggest that the economy expanded by 0.1 per cent in the last three months of 2024.

When money is tight, shoppers have decided they would rather see what they are buying first

Yet not all is well in retailing. Sales volumes in clothing fell by 2.7 per cent in January, and household goods by 1.7 per cent. It is not just a case of further decline on the high street. Online retailers endured an especially torrid month, with household goods sales down 14 per cent and clothing sales down by 7 per cent.

The great boom in online retailing, which was given a huge boost during the pandemic, appears to be well and truly over. When money is tight, perhaps shoppers have decided that they would rather see what they are buying first. Another factor is that online retailers have started to crack down on customers who order large volumes of clothes to try on at home knowing that they can return whatever they don’t like.

Last year, according to market intelligence firm Retail Economics, customers returned £27 billion worth of goods bought online. Of this, £6.6 billion was attributed to ‘serial returners’ who make a habit of sending back large volumes of goods. Younger generations are far worse at doing this than older ones, with the practice blamed partly on TikTok videos. To try to stem their losses from the practice, retailers have started to fight back. In October, Asos introduced a £3.95 charge if customers returned items and failed to keep at least £40 worth of their order.

It is extraordinary that retailers didn’t seem to see this coming. You want a special outfit for a big night out? Why buy one when you can order one over the internet and then send it back once the big night is over (assuming you can avoid spilling red wine over it)? It has become far too easy for customers to use online retailing as a free clothing hire service. That retailers have tolerated this speaks of some desperation on their part.

There is a word of caution, however, with this month’s retail sales figures – as with every month. They are seasonally adjusted, using assumptions about patterns of spending. That we saw a drop of 0.6 per cent in December followed by a rise of 1.7 per cent in January suggests that those assumptions may be a bit out of date – and that we are no longer splurging before Christmas as we used to do.

Seasonal adjustment attempts to smooth out the figures by revising December’s figures downwards and January’s figures upwards. But the latest figures seem to suggest that the figures may have been revised downwards a little too much in December and revised upwards a bit too much in January. Not that that will bother Reeves, I suspect, as she enjoys a rare bit of good news.     

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