Question of the FortnightQuestion of the Fortnight
10
THE FACTS
11 – 24 May 2022 • Issue 631- Online sales fell by 6.9 per
cent in February and 7.9 per
cent in March. - Amazon’s sales dropped
by three per cent in the first
quarter of 2022, its first
decline since 2015 - The proportion of shopping
done online is still much
higher than before the
pandemic
Sales have fallen sharply this year after hitting record highs in 2021
Why are we buying fewer
things online?
I
f a retailer as dominant as
Amazon has had a bad few
months, then you can bet
that other sites must have had
it even worse. Its global sales
fell by three per cent in the
first three months of the year- its first quarterly loss since
- It’s a sign that shoppers
are buying less online,
confirmed by UK figures
from the Office of National
Statistics (ONS, http://www.snipca.
com/41816), which said sales
dropped by 7.9 per cent in
March.
This decline doesn’t seem
like a blip: sales also fell in
February, by 6.9 per cent.
What’s interesting is that this
decline is sharper than for
items bought on the high
street. March sales in food
stores dropped by only 1.1 per
cent, for example, while sales
in DIY stores actually rose.
Overall, sales in March fell
by 1.4 per cent, which the ONS
attributed to the “cost of living
hitting consumers’ spending”.
But this doesn’t explain the
sudden dip in internet
shopping, which has more to
do with the end of Covid
restrictions, and people
returning to shops after fears
of catching Omicron kept
them at home in December
and January.
Also, it’s important to
remember just how unusual
the past two years have been.In February 2020, online
shopping accounted for 19.
per cent of all sales, a barely
noticeable increase on 17.6 a
year earlier. By May 2020,
with most shops shut and
Amazon and supermarket
delivery vans ruling the roads,
that figure had shot up to 33.
per cent. It peaked at 37.1 percent in February 2021, before
declining to 26 per cent in
March this year.
So while the proportion of
online sales has dropped
markedly this year, they’re
still above pre-Covid levels.
Without a pandemic, sales
may have naturally risen to
around 26 per cent, based
purely on the long-term
growth of internet shopping.
The key question is how
much of the decline this
year is down to the rising
cost of living, and howmuch to the return of
normality – people shutting
down their devices and
returning to the pre-pandemic
habits of visiting the shops,
going to pubs and spending
Sunday afternoons at garden
centres.
Perhaps we should look
for clues in the recent fall
in people subscribing to
TV-streaming services. Netflix
lost 200,000 viewers in the
first three months of 2022, its
first fall since 2011 (see page
49). UK research shows that
1.5 million people cancelled a
TV-streaming subscription
during that time, up from 1.
million at the end of last year.
Again, like online shopping,
these falls are from the record
highs reached during the
lockdown. Netflix still has 222
million subscribers, up from
167 million in 2019. The slight
fall in numbers would have to
become an avalanche to knock
Netflix back to pre-Covid
levels. But unlike online sales,
TV streaming feels especially
vulnerable to people ditching
lockdown behaviour and
rediscovering theirprevious interests.
It’s too early to say whether
online sales will continue to
decline, or whether they’ll
hit a temporary bottom
from where they’ll resume
increasing at a similar rate
as before 2020.
We think the latter is much
more likely. During lockdown,
excitable analysts spoke about
how ‘everything had changed
for good’, with the internet
now unbudgeable as our
main source of leisure and
shopping. But it now seems
that everything had changed
only for as long as normal life
was put on hold.Online sales fell further than
for items bought on the high street,
while sales in DIY stores rose