The rise of online retail: has consumer behaviour changed forever?

UK retail experienced robust demand in 2021, despite the continuing challenges posed by the COVID-19 pandemic. When lockdown restrictions lifted back in 2020, there was a significant increase in consumer spending, particularly for higher priced items. This helped to sustain the high street amid declining footfall, and this has continued into 2021 with retail sales in November 2021 up 4.7 per cent year on year. In February 2020, online purchases (excluding food items) were around 30 per cent of all retail sales, and more than doubled during the third lockdown before settling at around 40 per cent. As consumer behaviours continue to change, the high street must begin to adapt to increase footfall.

With retailers heavily investing in their digital presence for customers experiential retail is more important than ever. Brexit has meant that global trading relationships have evolved, and so the industry has continued to adapt to these seismic shifts. The next year will most likely continue to be a difficult one for most non-food retailers, particularly those without a developed online presence. Those that do succeed will most likely be those that have the resources to survive fluctuations, alongside a distinct USP that will attract and retain customers.

The UK’s leisure sector – encompassing everything from gyms to cinemas and leisure complexes – has faced a series of challenges as a result of the pandemic. Lockdowns led to many businesses pausing their operations for long periods of time, and consequently seeing cuts to all or parts of their revenue streams. These changes accelerated the shift in the use of online platforms, with a significant increase in consumers adopting home-based leisure activities. Arguably, consumers have adopted more digital behaviours – according to UK active there has been a 30 per cent increase in downloads of health and fitness apps and a 70 per cent increase in consumer spend on them.

However, there has been positive signs after the majority of the lockdown restrictions were lifted in July, showing how keen consumers have been to return to a sense of normality. As leisure based businesses have re-opened their doors, the total spend in the sector has seen an uptick. Savills cited that the sector returned to positive territory, up by 6.4 per cent in August 2021 compared to equivalent 2019 levels. Despite the significant challenges the sector has faced, as demand continues to increase, we can expect to see further opportunities in 2022.

A spotlight on online retail

As the growth of online retail accelerated during 2020, consumer habits that developed during the pandemic have become firmly entrenched, despite online sales falling as the high street re-opened. The online retail sector continues to innovate across sub-sectors, with grocery being transformed by innovative platforms such as Getir and Zapp, which deliver essentials in minutes, and the automotive retail sector’s bricks and mortar model has also adapted through online retailers such as Cazoo and Cinch. We have also seen social media influencers playing a prominent role in building brand profiles, and this trend for social commerce will undoubtedly gather momentum.

While it’s been generally positive for retailers with healthy portfolios, it’s not been without adversity. Inflation, supply chain shortages and shipping costs will continue to put pressure on the sector into 2022. The Omicron variant also weakened high street trading in the festive period, pushing consumers back to a greater reliance on online channels, the after effects of which will be felt into 2022.

Seismic changes in consumer behaviour mean all eyes are on upcoming developments, and whether online retail’s recent growth can be sustained. Faced with uncertainty, there will be an increased focus on consumer retention and competition among brands to win customer loyalty.