Shopping Around for Retail Data? How ONS keeps tabs on a fast-changing sector
Evolving shopping habits are keeping retailers on their toes, forcing many to adapt to survive. The rise of online sales and the disappearance of some big names from UK high streets have also challenged ONS to maintain the accuracy and relevance of the Retail Sales Index. As Rhian Murphy explains, the breadth of its coverage means the RSI remains a leading indicator – not just of retailing but of the economy as a whole.
Our retail sales figures often receive a lot of attention, and are sometimes seen as a good barometer for the health of the UK economy. However, it is a sector undergoing significant changes. People are changing how and when they spend their money, with ever more cash being spent online and promotions such as ‘Black Friday’ changing the retail calendar.
Our approach to collecting this information is currently based on survey based collections. We constantly monitor and review our surveys to ensure we update and capture features of this fast-changing industry.
“This is by far the best coverage of any available survey and gives us an almost complete picture of how the sector is operating.”
We collect the turnover of 5,000 retail shops and chains of every store type, including physical shops and online. Our short online survey is sent to all large stores and chains, who employ more than 100 people or have a turnover great than £60m per year as well as a comprehensive sample of small retailers, meaning that these 5,000 returns allow us to directly capture £9 in £10 spent in the retail sector, with the remainder then extrapolated from that survey data. This is by far the best coverage of any available survey and gives us an almost complete picture of how the sector is operating. In addition, to allow us full coverage of the industry we are currently planning to use additional VAT data to ensure the activities of all shops are included in our figures, while also helping reduce the burden on small retailers.
One of the changes we’ve been noticing is that not only is more of our money being spent online – 1 in every 5 of our pounds of total retail spending is now online – but the seasonal patterns are changing too. For example, most people used to do their Christmas shopping in December. However, a few years ago the ‘Black Friday’ phenomenon was imported from America. Initially, this took the form of a one-day sale often with significant discounts, but over recent years the event has changed, with many shops offering week long sales and many consumers using the opportunity to buy their Christmas gifts earlier.
“We review our approach each month to ensure we give the best estimate of the underlying picture of the industry.”
To help interpretation over time, we can strip out seasonal factors such as this to give an underlying picture of what’s really going on in the industry. We know December is a busy time for shops, but the question really is whether they are selling more in a particular December than we would expect. This process of ‘seasonal adjustment’ uses past patterns of sales to estimate whether this month has been better or worse than what would usually be expected. Developments such as Black Friday mean these types of seasonal patterns can evolve, changing on an annual basis, making seasonal adjustment more challenging as consumer behaviour shifts. We review our approach each month to ensure we give the best estimate of the underlying picture of the industry.
Another complicating factor is the number of high profile chains that have gone bust recently. However, the overall effect on total retail sales is minimal, as consumers simply switch to competitors or go online. While some of them cease trading overnight, many will keep trading while in receivership for several months, continuing the data feed into our figures. However, we closely monitor which companies are VAT or PAYE registered to ensure those that have genuinely ceased trading are no longer included in our survey.
“Over the last decade, the amount of money spent online has increased six-fold.”
Where people spend is also changing. Over the last decade, the amount of money spent online has increased six-fold. Just over half of this spending is on online only sites, where they don’t have a physical shop at all. However, the amount of money spent online from traditional high street stores – either through ‘click and collect’ or delivery to your home – has also increased, with clothing and department stores reaching record proportions of online trading in 2018.
Looking at the split by size of shops also paints an interesting picture. The performance of smaller, independent shops is important to capture to ensure we provide a comprehensive picture of the whole retail industry. Our smaller stores are defined by those who employ less than 100 and have a turnover less than £60m a year. In 2018 smaller stores contributed around 20% of the total activity, whereas larger stores contributed 80%. Small specialist food stores had a good 2018, with many consumers spending their money during the hot summer months. Consumers then returned to these same stores in the run up to Christmas to buy Christmas gifts.
As you can see, the retail industry undergoing significant changes but using the large amounts of data we receive from the businesses in our surveys and soon VAT returns, as well as calling on our experience of measuring these businesses, we are still able to produce accurate underlying estimates of the health of this important industry.
Rhian Murphy is Head of Retail Sales at ONS