Online spend has increased everywhere, but figures offer hope to traditional bricks and mortar.
Online shopping has been a growing threat to the high street, one in every five pounds spent by urban households was spent online at the start of the year. How has the pandemic accelerated this trend, and how has this played out across cities? On the eve of Black Friday 2020 and as the second England-wide lockdown seems set to end, this blog uses data on credit and debit card spending to look at resident spend across Britain’s 62 largest cities and towns up to September. (The data excludes financial transfers and household bills.)
Our research finds that:
Residents of Cambridge spent more online than any other city before the onset of Covid-19. In February of this year, 24 per cent of all spend was online. London was runner up, with 22 per cent. At the opposite end of the scale, at 16.4 per cent, the residents of Preston spent the least, alongside Blackburn and Burnley.
Figure 1: Online spending as a share of all spending by city, February 2020
Source: Beauclair, 2020
While online retail has clearly posed a challenge to high street retail, there is no relationship between share of spending online and vacancy rates in the city centre of each city. For example, Cambridge, London and Brighton, which has a reputation as a hub of independent retail, all have vibrant city centre high streets, while Blackburn, Burnley and Preston have more empty shops.
Unsurprisingly as shops, bars and restaurants closed in March, overall spend fell sharply and online spending increased its share of overall spend, both because online spend spiked and because the overall ‘size of the pie’ shrank.
As restrictions have lifted, two things have happened. Firstly, overall spending recovered back to pre-pandemic levels by the summer. The second is that, while the share of this spend done online fell as restrictions were lifted, by September this share was still higher than in February. For all urban residents, it increased from 19.5 per cent to 23.7 per cent.
This increase in the share of spend online is seen across all 62 cities. As Figure 2 below shows, Cambridge retained its crown as online spending capital, with 28.7 per cent of spend online (up 4.7 percentage points). Meanwhile Burnley remains at the bottom end, with its share rising to 19.3 per cent. Overall, it seems cities in the Greater South East do more of their shopping online compared to cities in the North and the Midlands.
Figure 2: Online spending as a share of all spending by city, September 2020
Source: Beauclair, 2020
Cardiff and Swansea saw the largest increases in their shares of spend online, followed by Norwich, Newport and Slough. All saw increases of around six percentage points. Meanwhile, Oxford saw the lowest increase, with a rise of 2.2 percentage points.
These patterns mean that urban residents spent 4.2 per cent more online in September than in February. Despite this increase, spending in bricks-and-mortar retail had returned to February levels by August (this may be skewed somewhat by people switching from cash to card). The chart below shows though that this return is not enough to offset the large fall in spend during the first lockdown and illustrates the weaker position the high street was in as the second England-wide lockdown began.
Figure 3: Online and in-store spending across all cities, indexed against February 2020 baseline
Source: Beauclair, 2020
The city where bricks and mortar had recovered the strongest is Hull. Assuming February levels of spend are representative of spending throughout a normal year, spending on the physical high street is down 1.8 per cent across March to September (compared to it being up 28.7 per cent on online). In contrast, bricks and mortar is struggling the most in London – spending in shops, bars and restaurants had not recovered to February levels by September. Over the seven months, bricks-and-mortar spend was down 21.9 per cent (it was up 21.8 percent for online).
Figure 4: Total takings online and in-store in Hull and London, relative to February 2020 benchmark
Source: Beauclair, 2020
While online spend in September accounted for a higher share of all spend across all cities, spending on the physical high street is still likely to have been suppressed by the threat of Covid-19, social distancing measures and the continued closure of some outlets and amenities. Given this, perhaps it is surprising that online spend had not increased its share by more than the data suggests. A fuller assessment will only be possible once the pandemic is fully managed, but these figures should at least give some comfort to the high street that the pandemic and the restrictions that come with it has not so far resulted in a large, irreversible jump in online shopping.
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mahfuz ahmed
Indeed, online shopping offers several advantages.