Internet sales hit record high

Internet sales hit a record high last month as more UK shoppers bought their Christmas presents online rather than in the shops.

But with the bad weather hampering deliveries in some parts of the country, there are also fears that many of these gifts may not arrive in time.

Internet shopping accounted for 10.5% of all retail sales in November, the highest market share on record and up from 7.9% a year ago. This is based on overall takings, so may also indicate that more high-value goods are being ordered online.

The Office for National Statistics also suggested there was "anecdotal evidence" that customers were browsing in stores and then placing orders online from home, if the product could be bought cheaper over the web. This would be a blow to high street retailers without an e-commerce arm.

The ONS estimated that around £660m was spent on internet retail sales each week during November, out of a total weekly retail bill, excluding fuel, of £6.3bn.

There are thought to be around 4m parcels sitting in the warehouses of private courier firms around the country. Snow and ice has disrupted deliveries for several weeks, and the weather is expected to worsen over the next few days.

Scotland and the north-east have been worst hit, but other parts of the country are forecast to suffer disruption in the run-up to Christmas.

"We are being told by certain of our carrier partners that things are so severe in Scotland that they're running out of vehicles and trailers in the rest of the UK, impacting on deliveries in England and Wales," Simon Veale, director of Global Freight Solutions, told the Daily Mail.

Overall retail sales in November rose by 0.3% compared with October and were 1.1% higher than a year ago, beating analyst forecasts. Predominantly non-food stores saw a 3.6% increase in sales year-on-year, while sales at predominantly food stores decreased by 1.3% – the fifth consecutive fall. Household goods stores, though, bucked the general trend with a 5.7% drop in sales – possibly because fewer people are moving house and buying new furniture. Paint sales also fell sharply.

"The overall impression is that retail sales were reasonable but unspectacular ahead of the key Christmas shopping period," said Howard Archer, chief European and UK economist at IHS Global Insight.

"This boosts retailers' hopes that consumers are determined to have a good Christmas despite significant economic worries and uncertainties, and despite weather obstacles," Archer added.

The snow has also prevented people reaching the shops, with many retailers warning that their sales have suffered in recent weeks.

retail confidence

crewe town centre

HMV and the Decline of Retail

Images of a flagship HMV store in London reveal much about the changing nature of retail down the years.

HMV is an iconic UK retail chain for music and films, founded in 1921 by the Gramaphone Company, which was one of the earliest companies to record and sell music to the public.

The store’s name is an acronym for “His Master’s Voice” and got its distinctive logo from a painting by English artist Francis Barraud.

It depicts a dog called Nipper, which the artist inherited from his late brother, as he listens to a recording on a wind-up gramophone.

Although for many years the company was not actually “HMV” or His Master’s Voice, the popularity of the trademark persisted and the first HMV shop opened in 1921 in London.

In the decades since then it has not only spawned shops around the world but remained a permanent retail fixture in the capital city, despite switching locations.

Recently the Voices of East Anglia blog posted some photos, including this shot from HMV’s Flickr account of what the store looked like in the 1960s.

The full gallery is worth checking out as you can see how people used to browse for vinyl records in the personal export lounge, examine whatmusic systems and televisions used to look like and observe the stage and screen section.

It really is like an episode of Mad Men.

There is also a gallery of photos from the 1970s (now in colour!) whichshows the same HMV store, though sadly not the interior.

I’m not an expert on the history of retail on Oxford Street (maybe someone can help in the comments?) but I think that HMV moved from this building and then opened a store across the street, before opening a larger store at 150 Oxford Street.

The original building is now this branch of Footlocker:

Last year HMV closed down the store near Bond Street tube station but the flagship store at 150 Oxford Street remains.

The only question is: for how long?

The recession has so far led to the closure of retailers like Woolworths,Borders and Zavvi (formerly Virgin Megastores).

On Oxford Street in particular, the closure of the Zavvi and Borders branches felt like the retail equivalent of organ removal.

Since I was a kid I’ve always browsed for music, films and books there and to see them close down is sad.

There is something to be said for the serendipity of browsing in a store, but the economics of these stores increasingly don’t add up in the age ofAmazon.

How can these places compete with a retailer which has dramatically lower overheads, enviable distribution costs, vastly superior customer data and greater insight into how people shop in the 21st century?

The ‘Amazon Effect’ on retail struck me when I went into the Covent Garden branch of Fopp, the music and film retailer which HMV bought in 2007.

When it comes to music, why would I want to purchase physical CDs when I can listen to vast amounts of music on Spotify and iTunes or (semi-legally) YouTube?

This very dilemma has seen the music industry decimated over the last decade and the vast profits generated from sales be transferred into the bank accounts of two technology giants.

In 2008 Apple surpassed Walmart to become the world’s largest music retailer as they reap enormous profits from selling the inexpensive digital music (MP3 files) and the expensive hardware on which it plays (iPods and iPhones).

Google have a search site which powers the proliferation of free MP3s (just type in the name of a song and you’ll probably find it) and in YouTube owns the worlds largest unofficial music library, which you can personalise by visiting www.youtube.com/disco.

Film is probably a few years behind music, but movie companies and retailers arguably face a similar tsunami of change as digital delivery of content (e.g. Netflix streaming) replaces the physical (e.g. DVD and Blu-ray discs).

Two things struck me as I browsed the DVD and Blu-ray section of Fopp,which HMV saved in 2007.

Firstly, this is a golden age of DVD bargains: the sheer quality of films on offer for bargain bucket prices was staggering.

For example, in HMV Oxford Street you can get the following titles for around £5: All The President’s Men (1976), Breathless (1960), Chinatown (1974) and Sideways (2004).

But this is also true of Amazon where you can get hold of classic material for low prices: Citizen Kane for £3.97, The Roman Polanksi Collection (3 film collection of Chinatown, Rosemary’s Baby and The Tenant!) for £6.93and if you want a great value blockbuster in HD, try Terminator 2 on Blu-ray for just £7.93.

In fact it was downstairs in the Blu-ray section of Fopp where the ‘Amazon effect’ really struck me.

I wanted to check out my favourite Blu-ray box set of 2010, which is theAlien Anthology (quick tip: skip the final two films, feast on the first two and put several hours aside for the incredible array of extras).

How much did the Alien Anthology Blu-ray box-set cost in Fopp? £52.

I got out my iPhone and ran a price check on Amazon, where it cost £19.98.

That’s a staggering price difference of £32.02.

Now this is just a single example of one particular product, but I suspect it is reflective of a wider shift as retail and content move into an increasingly virtual world.

Two months ago the BBC reported that HMV profits fell 14.5% in its results for the year to April and the share price has slumped dramaticallyover the past twelve months.

Part of their new strategy has been to open stores like the one in Wimbledon, which have a small cinema above the shop.

I went back in June and was impressed not only with the sound and projection, but the fact that they were screening up scale fare like Senna alongside blockbusters such as X-Men: First Class.

The other part of the strategy is for the group to expand into live ticketing and digital music.

But whether they can make significant profits from these avenues quickly enough remains to be seen.

Maintaining their bricks-and-mortar operations whilst trying to make inroads into the digital world is going to be a huge challenge.

Retail sales declined steadily in October

October saw retail sales fall at a similar rate to August and September with only a modest rise in volumes expected in November, according to new data from the Confederation of British Industry (CBI).

The latest CBI Monthly Distributive Trades Survey shows that 36 per cent of companies reported a fall in trading during the month compared to a quarter who witnessed a rise, meaning the rounded balance was down to 11 per cent from 15 per cent last month.

Volume of sales for the time of year was down 34 per cent, the lowest for over two years, with the steepest decline seen in the footwear and leather goods sector.

Ian McCafferty, CBI Chief Economic Adviser, said: “High street sales remain difficult but the decline has stabilised, and retailers expect there to be some very modest growth next month in the build-up to Christmas.

“Family budgets continue to be stretched because of a combination of high inflation, low wage growth and soaring unemployment, so consumer confidence is severely dented.

“High-street retailers are heavily discounting as they aim to provide the best possible value on basics, but consumers will continue on the back foot as real incomes remain squeezed.”

Whilst footwear & leather products fell in volume by 98 per cent, DIY goods dropped 75 per cent and clothing was down 39 per cent, however the grocery and furniture sectors performed more strongly with rises of 11 per cent and 34 per cent respectively.

Companies surveyed predicted sales volumes will rise by four per cent next month but Samuel Tombs, UK Economist at Capital Economics, warns that this positive outlook looks misplaced given the state of the general economy.

Tombs said: “The survey’s main reported sales balance rose from -15 to -11, beating consensus expectations for a fall.

“However, the balance recording sales for the time of year – which has had a better relationship with the official sales measure recently – fell from -30 to -34, its lowest level since May 2009. At that level, it points to retail sales volumes falling at an annual rate of around 0.5 per cent.

“With the squeeze on real pay set to remain intense for a while longer, unemployment falling and consumer confidence at very low levels, further falls in consumer spending seem very likely in the months ahead.”