We\’ve got the CoOp telling us that even food sales are falling:
Peter Marks said that for the first time people have been cutting food budgets – normally an area that is relied upon as \”recession-proof\”.
\”People are spending less on food – that\’s a first,\” said the Co-op\’s chief executive. He added that he and other retailers are having to cut prices radically to shift stock.
While normally around a quarter of products are on promotion, approximately 40pc are discounted at the moment, Mr Marks said. He added: \”We\’re not into \’buy one, get one free\’ – we\’re into \’buy one, get two free\’.\”
He added: \”It has been a tough six months, the toughest I\’ve ever experienced in my 40 years of retailing. I don\’t think we have come out of recession since 2008… I\’ve operated through several recessions – this is by far the longest.\”
The Co-Op, which is Britain\’s fifth biggest supermarket group, unveiled a fall in first-half pre-tax profits to £230.8m. Group sales fell from to 6.89bn in the six months to July, down from £6.95bn during the same period last year. Food sales were £3.7bn, 4.6pc lower than last year.
OK: I\’m not arguing with those figures. Rather with what interpretation you might put upon them. For it\’s essential to distinguish between some possible cyclical reasons (ie, the economy\’s in the toilet) and a structural reason…..and there could be any number of those. Perhaps there\’s fewer people about, perhaps we\’re all now on diets, maybe, well, think up your own unlikely cause.
My likely cause is that, at least in part, we\’re seeing a structural change in the way that people buy things. Yes, even food. For:
Based on ONS experimental Internet sales series, the non-seasonally adjusted average weekly
value of Internet retail sales in July 2011 was £523.4 million which was approximately 9.1 per
cent of total retail sales (excluding automotive fuel), compared with July 2010 which was £395.8
million which was approximately 7.1 per cent of total retail sales (excluding automotive fuel).
We really do have a structural change going on. And yes, that structural change is affecting even food sales. From box deliveries of organics through Ocado to Amazon now offering groceries.
I don\’t say that internet sales are the full and only cause of retail problems: yes, I\’m sure that recession and general pennilessness have an effect. But I do think that this structural change (look, nearly 10% of retail sales are over the net now, up from nothing a decade ago and they\’ve expanded by 2% of total retail sales in just the last twelvemonth) is the cause of at least part of it.
Does this matter though? In some cases no: if you\’re an investor in retail stocks then why doesn\’t matter. Falling sales are bad, M\’Kay? But in two other senses yes. The first is just the general accumulation of woe and gloom about the economy. Lower storefront sales aren\’t solely to do with woe and gloom in the economy therefore they shouldn\’t be taken as signs of woe and gloom in the economy. Solely.
The second is whatever might be a policy response to events. It the change is a structural one then things like lower interest rates, QE III, fiscal expansion, these aren\’t going to make a difference to that part of it which is structural.
Or, in short, as I\’ve said a number of times recently, if 10% of retail sales are now over the internet who is surprised that 10% of shops are empty?