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Online and retail sales growth subdued as the golden quarter gets off to a slow start

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In-store non-food sales declined in October
In-store non-food sales declined in October
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Online and retail sales growth subdued as the golden quarter gets off to a slow start

Retail sales growth stayed historically low in October as consumers held off spending ahead of ‘deep discounts’ expected over the Black Friday period, new British Retail Consortium figures suggest.

 

Total retail sales, across all channels, grew by 1.3% in October, according to the latest BRC-KPMG Retail Sales Monitor, with like-for-like sales, which strip out the effect of store, and business, openings and closures, up by 0.1%. Shoppers spent slightly more on food than they did a year ago – and more of their non-food spending took place online. Online sales of non-food products rose by 7.6% during the month. That’s slightly ahead of trend: online sales were up by 6.7% in the last three months, and by 7.4% in the last year. Some 27.6% of non-food sales were made over the internet during October – up from 25.7% a year earlier.

 

In-store non-food sales fell by 2% in total in the three months to the end of October, and by 3.3% on a like-for-like (LFL) basis that strips out the effect of store, and business, openings and closures.

 

Food sales grew by 1.2% (LFL) and by 2.3% in total. That’s below the 12-month total average growth rate of 3.5%.

 

BRC chief executive Helen Dickinson said that retail sales growth remained low by historical standards, with October sales only slightly higher than in the previous year, as consumer spending stayed cautious.

 

“Brighter weather and the anticipation of better deals in the Black Friday November sales have dampened demand for discretionary purchases,” said Dickinson. “Moreover, low real wage growth over an extended period has left consumers with less money in their pocket, squeezing retailers’ margins in the face of higher costs.

 

“Furthermore the very real possibility of a no-deal Brexit presents a huge challenge for retailers who must contend with the prospect of higher import prices, and further drops to consumer demand. Time is running out and it is essential that the Government, the EU and the UK Parliament come to an agreement on the backdrop and delivers a Brexit deal which gives confidence to both consumers and retailers, and avoids squeezing real wages further.”

 

Paul Martin, UK head of retail at KPMG, said that October was a non-starter as the start of the “all important golden quarter” in which some retailers earn most of their annual profits. “Demand was mainly dampened by continued economic uncertainty, as well as the anticipation for the deep discounting ahead - especially now that Black Friday weekend has become a permanent fixture. Grocery sales - which have been a ray of light, actually showed signs of restraint. However, clothing sales were more promising with the colder weather towards the end of the month prompting a wardrobe rethink.”

 

Meanwhile, analysis from pricing analysts Simon-Kucher found growing concern over potential price increases following Brexit. More than two-thirds (68%) stated they were either slightly concerned or very concerned about prices increasing as a results of Britain leaving the EU. Most of that concern, it found, came from Leave voters, with 45% now indicating a level of concern.

 

Half of those surveyed felt retailers would be justified in increasing prices after the UK’s departure if the reasons of higher costs due to Brexit was given. Remainers generally felt this was more justified with 69% indicating retailers were justified or partly justified. In contrast only 34% of Leavers felt the same.

 

Rosalind Hunter, senior director and Brexit research lead, at Simon-Kucher, said: “We have seen consumer facing companies such as retailers and restaurants struggle to pass through price increases incurred as a result of increased exchange rates following the leave vote and we don’t expect to see this change moving forward."

 

Image: Fotolia

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