Online retail sales soar but high street suffers

SHOPPERS bought record amounts from the internet last month, fuelling a rise in retail sales, in a positive indicator for the economy as a whole.

High street stores struggled by comparison, however, as even the sunny weather failed to tempt shoppers to put down their smartphones and computers to visit bricks and mortar shops instead.

Retail sales climbed by 0.7pc compared with the previous month and by 3.5pc on July last year, the Office for National Statistics (ONS) said, calming fears of a consumer slowdown when sales volumes fell in June.

Food purchases rose by 2.9pc on the year but other spending was more sluggish. Shoppers increased clothes purchases by 0.9pc and household goods by 1.7pc.

By contrast, internet sales surged, with annual growth of 16.9pc. This is the fastest increase recorded so far this year. Online sales now account for 18.2pc of all retail sales. Amazon’s “Prime Day” sales promotion may have contributed to this, according to Samuel Tombs at Pantheon Macroeconomics. The trend is sweeping traditional shops too. A record 18.2pc of department stores’ sales were carried out online, even as the struggle of the physical sites was illustrated by House of Fraser’s near-collapse and rescue through July and August.

Online sales account for 17.5pc of clothing purchases and 12pc of household goods, but just 5.6pc of food sales. Laith Khalaf, of Hargreaves Lansdown, said: “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.”

The sales figures come after a Kantar survey found 41pc of consumers favour shopping online for high street items, compared with 36pc who prefer a department store and 23pc who would rather go to a stand-alone shop.

Though some categories of shop are finding this environment more challenging, overall rising sales bode well for the economy. Kallum Pickering, an economist at Berenberg Bank, said: “We expect that stronger household consumption growth amid steadily accelerating real wage growth will be the key driver of UK real GDP growth over the medium term.”

Retailers said the sector remains vulnerable and could do with help on taxes. Rachel Lund, the industry trade body’s head of retail insight and analytics, said: “The British Retail Consortium has called for a two-year freeze in business rate increases and we need to see government action if we’re to alleviate some of the pressure.”