Have we reached peak online retail sales?

Once booming - online retail sales seem to be slowing. Is the supremacy of shopping online over, and are bricks and mortar stores fighting back? Professor Adrian Palmer discusses for Leading Insights.

Until recently, the value and volume of online retail sales seemed to only go one way - upwards. But recently, many graphs have been dipping, with previous online stock market high-flyers such as Ocado, ASOS and Boohoo reporting falling sales volumes, falling profits, or falling stock market prices. Previously, the question was how high online retail sales could rise as a proportion of total retail sales. The question now is how far that proportion may fall before establishing a new equilibrium.

Why are online sales slowing?

Online retailers were among the big winners of COVID lockdowns. With physical stores restricted, online retailers in many sectors had little competition from physical stores. In these conditions, online retailers could sell all that they had the capacity to handle. So, with many physical stores closed, and consumer spending generally suppressed, it is not surprising that online retail sales as a proportion of total sales rose sharply. In the UK, Office for National Statistics figures show a gradual rise to 20.2% in January 2020, just before the start of the first lockdown. The proportion rose to a peak of 37.8% in January 2021, and from then has been steadily falling to 24.8% of all retail sales in June 2022. During this period, seasonally adjusted total retail sales volume grew by 2.2%, so online retailing nevertheless came through Covid with a higher proportion of an increased volume of retail sales.