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Clicks smash bricks

Laith Khalaf

Retail sales volumes grew 3.5 percent in the year to July 2018, according to official ONS data published this morning. Contributor Laith Khalaf, Senior Analyst – Hargreaves Lansdown.

Online sales rose by 15.3 percent and now make up 18.2 percent of all retail sales, a new record high. Online sales in department stores rose by a massive 35 percent in the year to July 2018. Laith Khalaf, Senior Analyst, Hargreaves Lansdown: ‘There’s really only one winner in the battle between clicks and bricks at the moment, with online sales driving retail growth onwards and upwards. Even the dusty old department stores are belatedly getting in on the act and have seen a huge jump in the proportion of their sales coming from online purchases.

Internet shopping is clearly extremely popular with consumers because of its convenience, though it does take a toll on the high street. Even if more traditional stores are switching to the online channel, that means they need less physical space to sell stuff from. That spells more store closures, which clearly does nothing to attract people to the high street and is likely to contribute to declining footfall.

That’s not to say there’s no place for physical locations in retail. Even in a consumer environment increasingly dominated by the internet, physical stores provide convenient locations to pick up and return items ordered online. Primark has also demonstrated it’s possible to earn a decent crust running a retail franchise without an online sales channel. However more widely the retail sector is in the painful process of cutting its cloth to adjust to changing consumer shopping habits.

Overall retail sales bounced back in July after a disappointing showing in June, no doubt buoyed by the continuing good weather and the tail end of the World Cup. However the consumer environment still looks challenging, with big rises in energy and fuel costs hitting household budgets against a backdrop of weak wage growth.

The August interest rate rise is also going to increase borrowing costs for many, and though debt is still cheap, in such a constrained consumer environment that may well be enough to dampen activity.’

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