UK high street
UK retail sales up 5.4% in January.Reuters

British retail sales increased by the fastest pace since March 2010 last month, in line with the continued recovery in the property market, which was boosted sales of furniture and other non-food items.

The British Retail Consortium (BRC) said total retail sales increased by 5.4% on year in January, compared to a 3.0% increase in January 2013, and a 1.8% increase in December.

On a like-for-like basis, sales rose 3.9% from January 2013, when they had increased 1.9% on year.

"With a record number of people now in work and the continued recovery in the housing market we have seen very strong performances in furniture and other non-food items," Helen Dickinson, BRC director general, said in a statement.

"These figures are better than expected given the continued squeeze on personal finances but official figures show that this is not built on personal debt which remains below pre-recession levels."

Furniture was the top performing category, achieving its best growth since April 2006, according to the BRC. Other Non-Food items also contributed significantly to overall growth.

"A strong performance in furniture, flooring and home accessories hints that the recovery in house prices is having a positive knock on effect," said David McCorquodale, head of retail at consultants KPMG.

Meanwhile, sales of food items disappointed, as they experienced very low levels of growth in the last quarter.

"The divide between food and non-food is stark, with the battle for market share in food remaining ferocious, customer loyalty fickle and cost deflation being passed through to the consumer," McCorquodale said.

Post-Christmas Sales Promotions

"Customers responded enthusiastically to a range of sales and promotions on non-food items this January," Dickinson said.

She added that retailers succeeded in tempting shoppers in with promotions, and they witnessed strong demand across new ranges, helped by improvements in consumer confidence.

However, some retailers had to discount heavily to achieve higher sales, and the strategy is expected to harm their bottom-line results due to higher costs.

"Post-Christmas sales campaigns had boosted the top line: only time will tell at what cost to the bottom line," McCorquodale added.

Online Penetration

Online sales contributed heavily to January retail sales, with a penetration rate of 17.4%, reflecting the increasing importance of e-commerce in the retail mix in the UK. Online sales contributed 1.2 percentage points to the growth of Non-Food total sales.

Online sales of non-food products grew 19.2% in January versus a year earlier, the strongest January since 2009. In January 2013, online sales of non-food items increased by 13.5% year-on-year.

"Embracing omnichannel sales has been a big driver of business for UK retailers. We've seen an ever-more discerning customer taking good advantage of click and collect and other innovative services. The combination of an online presence with a bricks and mortar offering is becoming increasingly compelling," Dickinson said.