Can the January sales boom last?

Online sales in the first half of January were up by almost a third, compared to the same time last year, new research suggests.

But weekly sales figures issued today by John Lewis showed that the spending boom may be running out of steam, just as a report from GfK NOP showed a dramatic drop in consumer confidence.

Retail Decisions (ReD) says that the VAT freeze introduced by many etailers resulted in a January sales leap of an estimated 29%, compared to the first half of January 2010. Drawing on real-time sales estimates from online retailers between January 1 and January 16, the company says more than 16m transactions took place in the first half of the month, with January 4 – the day the VAT increase took effect – the busiest day of the year so far. The previous day, online shops saw revenue rise by 86% compared to the same day last year.

Carl Clump, chief executive of ReD, said: “Sales in the first seven days of the New Year were particularly strong, up 38% on the same week in 2010 as shoppers snapped up bargains in the January sales.

“People were keen to purchase items before the government’s VAT rise kicked-in, and obviously wanted to beat this deadline. But in the end, many retailers froze VAT as part of their January promotions, and shoppers took the opportunity to buy bigger ticket items such as consumer electronics, household appliances and furniture, which is reflected in the average transaction value, which rose to £172, compared with £154 in January last year.”

On average there were a million online transactions a day in the first half of January, worth an average of £182m, said ReD, as many retailers postponed passing on the VAT rise until their sales ended in the middle of the month, around January 16.

But there was early evidence today that the Christmas and New Year spending boom may be running out of steam. John Lewis figures for the week ending January 22, released today, showed a fall of 2.2%, including VAT, to £50.05m compared to the same week last year. Sales for the year to that week were up by 10.3%. Online sales continued to grow, but at a slower rate of 20.7%, compared to 38.9% in the year to date. The company said that it was a difficult week to measure against last year, when snowfall at the beginning of January led to growth later in the month.

At the same time new data from the GfK NOP consumer confidence index showed an eight point fall in consumer confidence, to -29. The appetite for spending on major purchases fell by 22 points to -29. In the 35 years that the index has run, this is only the sixth time confidence has fallen so quickly, said GfK NOP Social Research managing director Nick Moon, describing it as “an astonishing collapse in consumer confidence.” The last time was in the middle of the 1992 recession, he said.

Source : Chloe Rigby - Internet Retailing