Online shopping to soar as high street slumps

The Experian National Retail FootFall Index fell by 2.6% in July, the third consecutive drop of the year, echoing a similar pattern to that shown in June.  Despite this, July saw a very modest month-on-month rise of 2.7 per cent.

Matthew Sherwood, Senior Economist at Experian, comments: “The further drop in foot fall is in line with what retailers are telling us - shoppers are increasingly staying away from the high street. Official retail sales statistics are now finally telling us the same story.”

“Even with oil prices coming off a recent high, consumers will be squeezed by high petrol and food prices, rising home heating bills come winter and the continuation of the credit crunch until well into 2009.

“We forecast that sales volumes will contract in July-September, the first such fall since early 2006. The next 12 months are shaping up to be the slowest period for retailers since the early 1990s.”

Out-of-town shopping destinations continue to suffer as petrol prices, fears of economic gloom and warmer weather forces shoppers to reconsider where to make shopping trips.  A regional breakdown shows that the East of England, (-8.36%), Yorkshire (-5.93%) and Scotland (-6.05%) faced the largest drops year-on-year.  Evidently longer travel times and rising fuel costs means consumers are increasingly reluctant to spend money.

Commenting on FootFall's July Index, Ernst & Young retail analyst Jonathan Foster comments: “Lower shopper numbers and declines in consumers’ discretionary income are taking their toll on the retail sector. Big ticket purchases and sectors linked to the housing market have been hit hardest, particularly furniture, homewares, DIY and electricals.”

“Such tough trading conditions have led to an alarming number of company failures. More than 20 retailers have gone into administration this year alone – mainly in these ‘exposed’ sectors. Similarly, profit warnings have hit record levels.

“Our quarterly surveys have shown that there were 29 profit warnings by general retailers in the first six months of 2008, the highest number of warnings ever recorded by the sector in the first half. In line with deteriorating economic fundamentals, we believe even tougher times lie ahead with little evidence of a retail recovery until 2010.”

While shoppers to out of town retail destinations decrease, sports events such as the Olympics and The European Championships have had a positive impact on Internet shopping.  The latest data from Hitwise reveals a 3.2% year-on-year increase in traffic to shopping and classified websites.

Sport and fitness are the fastest growing sectors and visits to online retailers in this space have grown by 27% over the past 12 months (see table below).  Supporting the summer of sports theme, traffic to travel websites is down 19% year-on-year for July, while searches for ‘self catering’ are up by 40%, a clear indication that consumers are opting for more economical holidays. 

Robin Goad, Research Director at Hitwise, comments: “Consumers are becoming much savvier with their shopping.  Inspired by recent sporting events, many are turning to the Internet for the best deals. UK Internet searches for sports and fitness websites have increased in the past month alone and we predict a gradual growth as the Olympics take hold.” 

Chart indicating Experian National FootFall index July 2008.

Source: www.experiangroup.com