UK’s online retail sector continues to grow ahead of Christmas
We look at how coronavirus trends are still being felt in the lead-up to the festive season, and how independent retailers can capitalise on new habits
It’s no secret that the online retail sector has boomed since the onset of COVID-19. With people unwilling or unable to visit stores in person, it led to a swift move to online shopping. And as the busiest time of year draws nearer, the benefits of e-commerce are increasingly apparent. As high street footfall remains below pre-pandemic levels, retailers’ sales and share prices have been receiving a welcome boost, even.
Now, as we approach Christmas, and the Government places further restrictions on operating hours and social distancing, the importance of catering to an online audience is becoming increasingly evident.
A new way of operating
When the UK went into enforced lockdown back in March, it led to the closure of non-essential stores, dealing a near-fatal blow to the country’s half-a-trillion dollar retail industry. Yet as one in 10 stores remained empty, major online retailers witnessed a boom, helping the MSCI’s UK retail index outperform the country’s benchmark FTSE 100 by nearly 20%.
It’s perhaps unsurprising that some of the top performers in the index are online grocery shops such as Ocado Group – throughout lockdown, consumers were eating out less, and cooking from scratch more. Yet even as lockdown lifted and the foodservice industry gradually reopened, many consumers continued to do their grocery shopping online.
The popularity of e-commerce has been continuous yet gradual over the last few years, but the pandemic spurred its growth exponentially. Swiftly adapting to cater to new consumer habits, many independent retailers set up an online shop to increase sales, offering click-and-collect or home delivery services and even expanding their product ranges to cater to demand for essential items like toilet roll, flour and bread. Because online shopping becomes habitual, these changes are sure to pay off as we’re likely to see e-commerce stick around, particularly when it comes to food shopping.
According to Waitrose’s latest report, How Britain Shops Online, conducted with data from OnePoll research, 77% of people now do at least some of their grocery shopping online, compared to 61% a year ago. In fact, Waitrose itself notes that its online sales could soon account for 20% of the company’s total business, rising from just 6% last year. But it’s only the beginning, with many industry insiders agreeing that online shopping is going nowhere.
So what does this mean for independent retailers in the lead-up to the biggest time of year?
“Things are still moving, so it’s like crystal ball-gazing. And this thing is far from over, so it’s difficult to tell,” Edward Berry of independent food and retail consultancy The Flying Fork tells us.
“There are all sorts of gloomy messages about whether Christmas will happen at all; I’m reasonably optimistic about retail sales at Christmas, but of course it has to include online or some type of delivery service.
“Online isn’t for everyone because the independents don’t always have the level of software and purchasing equipment that the multiples do, and it’s become so competitive with big players as they have strong processes and fulfillments. But I have no doubt that click-and-collect, call-and-collect and home deliveries will be big at Christmas this year.”
Looking ahead to the busy festive period, Mark Kacary, managing director of The Norfolk Deli, agrees that online shopping is likely to play a bigger role this year. “We do think – and I stress ‘think’ – that online sales this Christmas will be higher than previous years (not that they haven’t been good previously). Whilst online shopping has gone down since full lockdown ended, we are up weekly on previous years, which means that customers have discovered businesses like ours and are using us. Whilst it’s unlikely to be a full lockdown again, there will be restrictions, and if the option is to buy somebody something online without having to go out, wear a mask, as so on, it feels likely that that’s a choice many people will make.”
During lockdown, many consumers showed support for local, independent retailers. And as supermarket loyalty faltered, it seemed that the strength of the multiples’ online offerings were the key determining factor in how they fared. Since the start of March, Ocado shares have increased around 120%, whilst Tesco’s have dropped by 4% and Sainsbury’s by 10%.
The increase in Ocado’s shares goes to show the potential in digital retail, and bodes well for the sector’s growth. While it’s difficult to predict future shares, it seems that the strength lies in businesses’ ability to adapt and cater to a growing demand for convenient online shopping and speedy home delivery.
While independent retailers may not be able to compete on the same level as the multiples, the rise of e-commerce coupled with trends for supporting local businesses and focusing on provenance presents numerous opportunities during the festive period. The work that retailers put in during lockdown earlier this year will no doubt help to boost sales at Christmas, too.
But it’s not just about grocery delivery: online platforms give retailers increased opportunities to communicate with your audience, inspire them and offer added-value, whilst home delivery offers the chance to engage with your customers and provide a more genuine, personalised experience. There are no doubt various opportunities for retailers to capitalize on this moving into Christmas. Since lockdown, a huge number of consumers have been cooking from scratch, and visiting online websites for recipe ideas, from healthy dishes and vegan recipes, to how-to recipes for breadmaking and roasting meat.
Tapping into trends like these, particularly around the holidays, is a great way of ensuring your brand stands out from the crowd. By adapting and engaging with customers, you can find creative ways to increase your sales during the holiday season, no matter what restrictions may be in place.
“Overall, the one big factor that will affect retail sales is that when it comes to celebrating, a lot of it will be at home,” Edwards says. “We’ve seen this new imposition of a 10 o’clock curfew, and if that’s left for longer, then the new norm will be celebrating at home.
“Christmas is always an extraordinary period for retailers – at times, sanity goes out the window when you look at what people buy and how they spend! Remember that you have got the gift shopper and the food shopper. And don’t forget that cash flow for consumers is actually pretty good, as those who have a job won’t be out spending money. So a lot of it also goes back to the concept of retaining your lockdown audience to keep new shoppers with you.”
Edward continues, “When it comes to independent retailers, some business owners took lockdown as a real opportunity, and they planned their new business. They’ve learnt how to retail in the new world, and the importance of communicating with customers, so there’s a general sense of optimism. The ones that saw their basket size grow dramatically, their biggest problem is managing their business and keeping up with new demand.”
For Mark, drawing on the business’ experience over the last six months is helping to shape their Christmas plans: “We’re planning to make greater use of social media advertising, and ensuring we are well stocked with produce, hampers and all the ancillary items we need to ensure that when somebody buys a hamper with us and uses us as a business, they get a sense of luxury that they’d expect from a personal retail experience. The truth is, we simply don’t know what to expect, but are having to go with our guts and experiences of the last six months and hope we get it right.”