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The third nationwide lockdown has hit the UK economy hard as consumers tighten their belts and cut spending by a staggering amount, according to new ONS data.
But what money was spent appears to have benefited online retailers as data shows a record proportion was spent online in January, to the benefit of the sector's dominant players: Amazon and eBay.
The ONS reports UK retail sales, including fuel sales, fell an eye-opening 8.2% month-on-month in January, which is down on the 0.3% rise recorded in December. The January figure will be something of a shock to the market given consensus was looking for a reading of -2.5%.
"The third national lockdown has taken the UK high street to the edge of the abyss," says Ayush Ansal, chief investment officer at the London-based hedge fund, Crimson Black Capital.
"For the average British retailer, the reopening of the economy as a result of the mass vaccination programme cannot come soon enough," he adds.
Year-on-year the decline was 5.9%, which compares unfavourably to the 2.9% increase recorded in December and the -1.3% expected by the market.
With fuel sales excluded, the decline in January is even deeper with a reading of -8.8% month-on-month being recorded against December's +0/4% and the consensus expectation being -2.6%.
Retail sales, excluding fuel, were 3.8% lower year-on-year, which compares to the previous month's +6/4% and the expectation held by markets for a reading of +2.2%.
"The lates national lockdown led to a sharp monthly fall in January's retail sales, with April 2020 the only month on record to see a bigger slump," said Jonathan Athow, Deputy National Statistician for Economic Statistics at the ONS.
Department and clothing store sales were understandably the hardest hit, given the closure of all non-essential retail outlets by the government.
However, the scale of the decline in January was said to be less severe than during the first lockdown given many retailers have been able to adapt.
Online retailers do however continue to reap the benefits of lockdown as the share of online sales soared to a record high and accounted for over a third of total spending.
"It was also a strong month for food stores due to the closure of pubs and restaurants," said Athow.
The record proportion spent online was 35.2% in January 2021 which compares with 29.6% in December 2020 and 19.5% reported in January 2020.
Currently, the UK retail landscape is dominated by U.S. corporations with the most recent available data showing that in 2019 Amazon accounted for 30% of all online UK sales, with eBay accounting for a further 10%.
The most comprehensive data on the UK online retail landscape is provided by Ascential, whose 2019 report revealed Amazon dominates UK ecommerce (30.1%), accounting for $30bn in sales in 2019.
The next biggest player is eBay, which takes a 9.8% share of the online market, followed by Sainsbury’s (4.6%), Tesco (4.5%), Walmart/Asda (3.9%), and John Lewis (3.6%).
Economists at ING say there is "clearly no going back from online shopping," however 2021 should nevertheless see a pick up for retail sales as lockdowns are eased on a sustainable basis.
"The pandemic-induced switch to online retail is unlikely to be reversed, posing ongoing challenges for the high street says James Smith, an economist at ING.
Smith observes that the trend away from bricks-and-mortar to online was already well underway prior to the pandemic, and that the events of 2020-2021 have only accelerated the shift.
But, coming months should see consumer spending increase as the economy is fully unlocked.
"Assuming the spring reopening proves sustainable, and the vaccines succeed in keeping transmission and hospitalisations contained, then consumer spending is likely to rise strongly from spring onwards," says James Smith, an economist at ING.
However, ING say the services sector will likely be the main beneficiary of such spending and therefore retailers might suffer further consolidation.