FSP Retail Blog

Making Silk Purses from Sow’s Ears

Do retail Like-for-Like (LfL) figures include or exclude internet sales? Not a trick question but a matter of some importance to understanding what is happening in UK retail.

Most retailers, who reasonably consider the internet just another channel to market, include sales through the web in their LfL figures. To put the best gloss on their figures, they are incentivised to include the most rapidly growing sales channel. However, to understand the health of the High Street, internet sales should be excluded. As of course should sales through Out-of-Town stores.

And this provides the clue – the problem of definition. In the same way that in practice the exact definition of Out-of-Town (OOT) is ultimately arbitrary, many internet sales straddle the physical and digital divide. The dominance of bricks-and-clicks retailers on the internet testifies to the advantages of having a physical presence.

The current situation is further complicated by changes to VAT rates. FSP again plans to be first to summarise Christmas sales figures but the raw figures will include sales at a lower rate of VAT than last year. Perhaps of greater significance is how widely retailers used the cut as an opportunity to raise margins and the effect of the cut on consumer spending. The economists believe it created real benefit, retailers seem much less certain. The prospect of the restoration of the VAT rate in January is less divisive. All are agreed it will not of itself stimulate consumer demand. The prospect may help sales in December but not in January.

As a group of retail analysts, FSP benefits from this lack of clarity in reported retail sales figures. FSP expends time and effort on systems to collect and analyse sales data which then inform its advice and recommendations. Nevertheless, FSP would welcome the restoration of the late, and widely lamented by those who still remember it, Retail Sales Enquiry. This provided a more detailed and geographic analysis of retail sales. It was abolished by the Thatcher Government in one of its least effective cost savings. However, while death and taxes are the only two certainties in life, I think the restoration of the Retail Sales Enquiry any time soon might fairly rank alongside them.

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