Pace of online retail revolution shocks leading retailers

This is despite overall retail sales growing by just 1.8pc, the slowest rate for a year. Online sales now account for 18.6pc of consumers spending, a record level, as families use their smartphones and tablets to buy products.

This shift from the high street to online has left some of the biggest names in British retailing reeling.

Companies such as Tesco, Morrisons and Debenhams – three of the losers over Christmas – are not just suffering from a decline in sales in their core stores, but are trying to understand how online retailing has changed how families shop. For example, consumer's growing confidence in the reliability of internet retailing meant that they left Christmas shopping until much later in December, while they are also spreading their spending around different retailers.

Next, which reported strong Christmas sales, said shoppers used its free next day click-and-collect service to order presents on the weekend before Christmas and then collected them from their local store on December 23 or December 24.

One senior retail source said: “It is too late for a digital strategy. It has to be part of the business.”

The retailers that performed strongly over Christmas, such as Next, John Lewis, and House of Fraser, have well-established online businesses with popular click-and-collect services.

Andy Street, the managing director of John Lewis, said: “People were expecting it [Christmas trading] to be better, but actually, one of the most interesting features is how trading has been a different shape to previous years. You usually see a steady uplift and then it actually plateaus, but there was a very intense, late peak.”

John Lewis online sales rose by 22.6pc during December. Within this growth, click-and-collect orders rose by a staggering 62pc. This year click-and-collect orders are expected to account for half of John Lewis’s online sales.

Helen Dickinson, director general of the BRC, said: “This Christmas we’ve seen innovative retailers using click-and-collect and other approaches to make a virtue of both their website and their physical shops.

“And that’s something we see growing in importance. Fast deliveries and social media offers have also helped us to plan ahead and cover off our Christmas lists efficiently.”

Later in the month, other winners from the Christmas trading period will emerge, with fashion retailer Asos, electrical group Dixons, and Argos-owner Home Retail Group all yet to report.

David McCorquodale, head of retail at KPMG, added: “The winners this Christmas were those retailers with slick multichannel operations, who could offer consumers the flexibility to shop how, and when, they wanted to.

“Retailers now need to focus on the ‘last mile’ and figure out how to get the item to the customer even faster. Retailers who can offer same day delivery, at a reasonable price, will be the winners in the race for sales in 2014, and steal a march on their competitors.”

The retailers without an online service have, in the main, been left behind. The exception is Primark, whose cut-price fashion is still attracting customers to its stores.

However, there has been no such relief for Morrisons. On Friday, chief executive Dalton Philips delivered the supermarket group’s first ever online order. However, this is more than 13 years after Tesco.com was launched.

Morrisons’ lack of an online and significant convenience store business (the company has 100 small stores compared to 1,500 Tesco Express) led to the retailer being hammered over Christmas as it also lost shoppers to the discounters Aldi and Lidl.

Mr Philips said that when the impact of online and convenience stores is stripped out, Morrisons performance would have been “bang in the middle of the pack”. He added: “Structurally, the industry has to think through big stores.”

Dave McCarthy, retail analyst at HSBC, went even further, claiming there was a “generational shift” taking place in UK retailing.

He said: “In a 24-hour period, the three quoted UK food retailers all led expectations down for current-year forecasts, with read-through for next year. All three had a poor Christmas but, importantly, all three talked about the structural shift in shopping behaviour.

“As we have said before, this is an industry in transition, not an industry in decline. It is a quoted sector problem.

“Waitrose and the Co-Op outperformed the quoted three, while Aldi and Lidl are expected to do so also. This is a large store problem, with the seeds sown years ago.”

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