Marks & Spencer online sales up 29% – 27 stores close

Written by Gary Robinson

I read with interest today that Marks & Spencer have announced an impressive 29% increase in online sales in the 3rd quarter of their financial year.

This comes as the retailer today announced plans to close 27 high street stores due to poor financial performance in the economic downturn. The firm reported UK like-for-like sales fell 7.1% in the 13 weeks to 27 December. 1200 jobs are planned to go as part of the cost cutting.

This news came hot on the heels of reports of poor performance from other high street retailers – Next saw like-for-like sales drop 7% over the last 6 months; Debenhams dropped 3.3% over the last 12 weeks and administrators have been called in to Adams Kids and Zavvi.

However, online sales are on the up according to many retailers:

Asda Direct has seen 70% growth year on year
Dominos Pizza saw a 10% increase in like for like sales
Debenhams Direct saw online sales up by 37.4%
Next Directory (60% of online sales) saw a 1.1% increase on last year

New Media Age have also announced today the results of a survey into planned shopping habits in 2009. The survey revealed that nearly half of all respondents in the 18-34 age range (key spenders demographic) planned to spend more online and less on the high street this year.

It would appear that in these difficult times, when individuals have less to spend they are increasingly turning to the internet to look for bargains. Sir Stuart Rose, chairman of Marks & Spencer Group, said, “Online performed strongly in Q3 with record traffic driving sales up 29%; stock clearance was especially fast.”

I think we’re becoming far more price conscious, as news of the ecomonic situation worsens. We still have the appetite to purchase new things – we’re not that far removed from the days of ‘endless’ credit and free spending to have forgotten the appeal of something new and shiny – but we’re just more cautious and calculating in our approach. Fewer people will buy something immediately when they first spot it in a high street shop – they’re more likely to go and have a look around online for a better price.

It’s not just a better price that is effecting buying habits and ultimately sales figures, it’s volume or frequency of purchase. With less disposable income, shoppers are having to limit their purchases and choose the thing they want the most. In the glory days of recent years, you would have bought both things, now we’re showing some restraint.

This new consumer behaviour is no different to patterns seen in the business sector. Companies are limiting the number of services they are using and being more considered in their spending or consumption habits.

For those of us that work online, whilst our businesses are not immune to the changes in spending habits, we are at least in a more positive position than our offline counterparts. Many online businesses were built with more cost effective approaches in mind. Many Pure Play online businesses have lower overheads due to a lack of physical stores or if service based, don’t have manufacturing or product storage costs.

All in all, it’s going to be a tough year ahead for businesses – on or offline – but from it we’ll hopefully see better efficiency in how businesses are run, less wastage and more innovation. It’s going to be a challenging year.