The ONS released the latest estimate of retail sales for February 2023 this morning. They estimate that retail sales volumes increased by 1.2% in February 2023, following a rise of 0.9% in January 2023 (revised from a rise of 0.5%); when compared with the same month a year earlier sales volumes fell by 3.5%.
Looking at the broader picture, retail sales volumes fell by 0.3% in the three months to February 2023 when compared with the previous three months.
Non-store retailing (predominantly online retailers) sales volumes rose by 0.2% in February 2023, following a rise of 2.9% in January 2023.
Retailers must battle to retain customer loyalty in the face of these numbers says Dan Edelman, especially as many adjust their reward schemes making them less attractive to consumers as they fight to balance their cost base.
Today’s retail sales figures paired with inflation unexpectedly jumping and interest rates being hiked again, means Spring has not sprung in the way retailers might have hoped.
Retailers face a battle to retain loyalty as customers continue to seek out value from their spend. While discounting could provide some short-term gains, it’s critical that loyalty is reviewed holistically. The influence of value, experience and convenience to the overall sentiment a customer has about a particular brand can’t be underestimated.
In recent weeks, some brands have been scrutinised as a result of rolling back on their reward schemes. However a challenging economy requires agility, and they are likely rethinking strategies to boost loyalty in other ways, with service and experience at the forefront. American Express’ latest research shows that almost three-quarters (73%) of shoppers wouldn’t buy from the same retailer again if they had a bad experience, meaning brands must redouble their efforts in order to secure ongoing customer loyalty.
– Dan Edelman, Vice President & UK General Manager, Merchant Services, American Express
At the same time, consumers continue to trade down on their luxury purchases says Jack Pierse, preferring lower cost items or exchanging premium brands for alternatives.
Ecommerce businesses have had a lot to contend with over the last 12 months, so they will no doubt be relieved to see the uplift in online sales in February. While there is still a difficult road ahead for online merchants as consumers tighten their budgets, what we’re seeing is consumers are indulging in ‘affordable splurges’.
Our own data shows that online beauty merchants have seen a spike in sales in the last 12 months prior to February 2023, which points to what is known as the lipstick effect – whereby in the face of an economic crisis, price-conscious consumers look to buy less costly luxury goods and cosmetics like a high end lipstick, over a high end leather coat for example.
Even against a hardening economic backdrop, there are still opportunities for online retailers, but their cash flow woes won’t be resolved overnight. Now, more than ever, they need access to fair, flexible and affordable funding sources to continue to buy inventory and invest in marketing to withstand turbulent economic conditions.
– Jack Pierse, Co-Founder & CFO of Wayflyer
Checkout abandonment is on the rise according to Mark Whybrow, and a frictionless, preferably a one-click option giving consumers little time to reconsider the amount they are about to spend, is key to survival.
A month of stagnant retail sales won’t be surprising to retailers who are already dealing with a prolonged period of lacklustre trading. With inflation hitting double digits once again in February, it’s no wonder consumers are hesitant to spend. As price reductions become less feasible due to squeezed margins, retailers cannot afford to ignore opportunities at the checkout to compete for customers and build loyalty.
Our latest research identified that 70% of consumers are abandoning online shopping baskets at least once a month, demonstrating the sheer number of missed sales due to friction at the checkout. Unsurprisingly, the same proportion also told us that they would opt for a one-click option if it was quicker, demonstrating the value in streamlining the checkout process.
As retailers battle against a highly competitive backdrop, businesses will need to fight for consumers on all fronts. Innovating to create a more simplified and convenient customer experience could be the key to unlocking growth and win in their market.
– Mark Whybrow, Enterprise Sales Manager, BR-DGE
