The BRC-KPMG Retail Sales Monitor (RSM), an accurate monthly measure of UK-wide retail sales performance said that over the three months leading up to October, UK retail total sales increased by 2.5%, which is below the 3-month average growth of 3.1% and the 12-month average growth of 4.2%.
Paul Martin, UK head of retail at KPMG, noted that a “mild October” saw consumers put off shopping trips to replenish winter wardrobes because the public is operating in a lower inflationary environment compared to October 2022, Martin believes the last 12 months have knocked the confidence of consumers and their ability to spend.
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“Coupled with a higher interest rate environment, dwindling COVID savings and the heating coming back on, beleaguered consumers are thinking very carefully about how they spend their money,” said Martin.
Helen Dickinson OBE, chief executive of the BRC, echoed Martins’s sentiments on factors influencing the slowdown in UK retail sales and added: “Many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales.
“The cost-of-living squeeze meant more was spent on lower-price indulgences, such as beauty products – the so-called ‘Lipstick Effect’. Meanwhile, the arrival of some colder weather helped to boost fashion sales, particularly for outdoor wear.”
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Dickinson touched on the need for retailers to continue investing in lowering prices and streamlining their operations, especially at a time when delivering an “affordable Christmas” is essential.
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By GlobalDataHowever, she warns that this effort is at risk due to the £470m per year increase in business rates facing retailers in the coming year.
Dickinson urges the Chancellor to freeze these rates in the upcoming Autumn Statement to prevent additional cost pressure, which could result in price increases for consumers.
Martin said that although the retail sector’s cost control is important its overall health depends on macro demand.
He continued to say that retailers are facing a challenging Christmas season, where they will compete for a shrinking share of the consumer wallet, driven by promotions that could cut into already tight profit margins.
“With spending levels expected to be much more muted this year, the run-up to Christmas could be the most challenging we’ve seen since pre-pandemic days,” added Martin.
August UK retail sales overview:
- Non-food sales decreased by 1.0% on a Total basis over the three months to October. This is below the 12-month average growth of 0.6%. For the month of October, Non-Food was in decline year-on-year.
- Over the three months to October, In-store Non-Food sales decreased 0.1% on a Total basis since October 2022. This is below the 12-month average growth of 3.0%.
- Online Non-Food sales decreased by 2.5% in October, against a decline of 6.3% in October 2022. This was shallower than the 3-month decline of 2.7% and deeper than the 12-month decline of 2.9%.
- The proportion of Non-Food items bought online (penetration rate) decreased to 36.5% in October from 36.6% in October 2022.
In August, UK retail sales volumes grew 0.4% in August, up from a revised fall of 1.1% in July.
