Clear Digital Digest: 5 big shifts, retail round-up and retro gaming

​It’s now been 5 months since we entered lockdown and then slowly started to re-emerge as restrictions began to ease, bit by bit.  It would be trite to say the world has changed in a way previously unrecognisable to all of us; of course it has and constantly so.  In fact the pace of change makes it increasingly difficult to keep up, especially with a seemingly never-ending deluge of data and information and data being provided. 
Looking at these awful events from an ecommerce perspective, I’ve highlighted 5 key trends from these last 5 months to help understand the seismic shifts we’ve been experiencing with regards to how customers have been shopping during this unique period:
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1. Online sales have accounted for as much as a third of total retail sales during lockdown
2. Ecommerce drove £658m of additional grocery sales just last month
3. Such dynamic growth is speeding up sector innovation
4. Spending is very squeezed in other sectors, especially clothing and for mid-market brands
5. As well as ecommerce innovation, other new channels are being introduced, such as product rental

This Clear Digital Digest takes a look at each of these trends in turn, as well as providing some retro gaming light relief at the end…

1. ONLINE SALES HAVE ACCOUNTED FOR AS MUCH AS A THIRD OF TOTAL RETAIL SALES DURING LOCKDOWN 

​This insightful chart from the Office for National Statistics (ONS) shows the huge growth in ecommerce sales during lockdown, with internet sales peaking at 32.8% of all retail sales in May.  

Source: ONS

• The forced shutdown of many stores has of course played a part in this, albeit internet sales still accounted for 31.1% in June, despite non-essential stores being able to open from 15th June onwards.  This figure of 31.1% compared to 18.3% in June 2019, so was 12.8% higher than last year.
• July’s figures have just been released today (21st August) – with internet sales accounting for 28.1% of total retail sales in the first full month that all shops have been able to open since lockdown, this is 9.4% higher than the figure of 18.7% for July 2019 thus demonstrating that this pretty significant shift towards online shopping appears to be continuing.

​2. ECOMMERCE DROVE £658M OF ADDITIONAL GROCERY SALES JUST LAST MONTH

• Of course the grocery sector has been trading throughout lockdown and so really helps to emphasise the shift towards online shopping, as recent Nielsen stats show…

• Nielsen UK’s latest data shows that in the 4 weeks to August 8 online grocery sales rose by 117%, achieving a record market share of 14%, which they have described as “the most dramatic change of shopping behaviour we’ve ever seen”.

• UK shoppers spent £678 million more on FMCG products during the month, but online sales growth of £658m accounted for a massive 97 per cent of this increase.
• In store sales in comparison rose just 0.3 per cent compared to last year, representing spending growth of £20 million. 

According to Nielsen’s head of retailer and business insight Mike Watkins:​
"It is evident that some new shopping habits that developed as a result of the pandemic – such as opting to shop online – continue.  UK shoppers are now establishing a new, regular shopping routine and we can expect the current levels of growth to continue for the rest of the summer.  Shoppers are still shopping less often than they did prior to the pandemic, visits to stores are down 15% on the same period last year, but up from the 22% decrease registered in May, so there are signs of a willingness to return.  The shift to online grocery shopping, which looks set to stay, is the most dramatic change of shopping behaviour we’ve ever seen. Though it has clearly been a positive gamechanger for shoppers and some retailers, it has come at the expense of stores – something that we have already seen in non-food retailing.”

• And grocery retailers concur with Nielsen’s sentiments – for example Waitrose executive director James Bailey stated this week: “One in four of us now do a grocery shop online at least once a week, double the amount in 2019. Because online shopping quickly becomes habitual these changes are irreversible”.

3.  SUCH DYNAMIC ECOMMERE GROWTH IS SPEEDING UP SECTOR INNOVATION

This step change in customer behaviour is seeing a never faster pace of innovation within the market, with recent developments including:

• Amazon has recently announced plans to expand its Amazon Fresh food offering nationwide in the UK, a move long expected by the established grocery giants.  An add-on to its Prime/delivery membership currently available in London and surrounding areas, Amazon has promised wider availability for the service by the end of 2020, including in major cities such as Birmingham, Manchester and Edinburgh.

• Following Amazon’s announcement, Tesco last weekend announced that they were considering introducing free online grocery delivery for members of their Clubcard Plus scheme, which charges £7.99 per month for various perks, very similar to the cost of Amazon Prime. 
• And a longer term change that was actually announced back in 2018 sees Ocado starting their new Marks & Spencer partnership next month, as M&S takes over Ocado’s long-standing supply partnership with Waitrose.  Marks & Spencer spent £750m to purchase half of Ocado’s retail arm last year, a joint venture deal that looks much more tasty following this year’s unpredictable events.  

4. SPENDING IS VERY SQUEEZED IN OTHER SECTORS, ESPECIALLY CLOTHING AND MID-MARKET BRANDS

• But while Marks & Spencer’s Ocado tie-up may help their food sales, M&S has hit the headlines for much less pleasant reasons this week, with 7000 jobs to be cut over the next 3 months.
• Sadly, huge retail job losses seems to be part of the daily news cycle at the moment, but these are also increasingly polarised as mid-market brands with a clothing focus seem to be particularly hard hit - for example, 1300 jobs are at risk at John Lewis while Debenhams (whose troubles date back pre-Covid) announced another 2500 job cuts just last week, on top of 4000 when it fell into administration for the second time in a year in April.

• As the graph above shows, recent ONS data also demonstrates that clothing sales have been particularly hard hit by the pandemic.
• However, this also shows that some household goods categories are actually performing well, especially online.
• The graph below breaks this down further, demonstrating that electricals and DIY are the sectors that are especially driving these sales.

• Again, this is borne out by recent retail trading statements, with online electrical specialists AO.com reporting UK sales growth of 59% in the 4 months to July.  As per Waitrose’s views on fundamental shifts to recent shopping habits, AO have said that “the demand for AO’s products and services has been sustained since competitor stores started to re-open at the beginning of July.  This reaffirms our belief that this is a structural shift in demand where customers have found a better way to shop the electricals category”.
• DIY giant B&Q have also reported recent bumper trading, with LFL sales jumping by 21.6% in the 3 months to 18th July, despite stores only reopening in late April.  Online sales therefore saw a huge increase, surging by more than 200% in both May and June.

5. AS WELL AS ECOMMERCE INNOVATION, OTHER NEW CHANNELS ARE BEING INTRODUCED, SUCH AS PRODUCT RENTAL

• Such polarisation is seeing all retailers need to speed up their pace of innovation.  Accelerating online expansion is a very common theme by pretty much all retailers, but there have also been some intriguing other recent stories, especially from some of those brands we identified above as struggling.
• John Lewis last weekend trailed plans to allow customers to rent rather than purchase their furniture.  Managed in partnership with rental marketplace Fat Llama, 50 different items will initially be available.  John Lewis claim that “attitudes towards renting items and the sharing economy have dramatically shifted in recent years, and we know that renting, reselling items and recycling them is a growing priority for our customers” – but is this really very different from a middle class Brighthouse, the sometimes controversial rent-to-own chain that fell into administration in March?

• In a similar move, Selfridges have just announced that they will be offering clothing rental, in conjunction with Hurr Collective, an online fashion rental company.  Perhaps unsurprisingly. Selfridges are playing up the sustainability angle on this move; and the increasing desire from younger customers for ethical, sustainable products was also explored in my recent deep dive look at “the UK marketplace sector – and the role of community”.

AND FINALLY…
As an 80s kid that loved arcade gaming and a 90s student who used part of his student loan to buy a Sega Mega Drive, before then becoming involved professionally as a PS2/Xbox buyer in the 00s, I really enjoyed watching the new Netflix video games history docuseries “High Score” - well the first two episodes I have thus far encountered anyway…