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IREU Top500 The Customer Report: 2018

IREU Top500 The Customer Report: 2018

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UK retail sales flat in January with worse to come as inflation set to rise, ONS data warns

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UK retail sales flat in January with worse to come as inflation set to rise, ONS data warns
UK retail sales flat in January with worse to come as inflation set to rise, ONS data warns

Sales across UK retailing have been largely flat in January, with continued slowdown in the coming months, predicts the latest ONS figures out today.

In January 2018, the underlying pattern in retail sales, as suggested by the three-month on three-month measure, is one of slow growth with the quantity bought increasing by 0.1%; the lowest growth since April 2017.

Ecommerce saw a slowing in growth from 19.1% this time last year to 9% – this means that ecommerce in January accounted for 16.5% of all retail sales, down from 18% in December.

The main contribution to the year-on-year growth came from non-food stores, with sports equipment, games and toys increasing sales in the quantity bought in this sector by 10.9%.

Feedback from retailers suggested that New Year’s resolutions to “get fit and lose weight” contributed to this increase of sales when compared with the previous year.

The year-on-year growth rate for quantity bought in food stores showed a decline for the sixth consecutive month at negative 0.9%, due largely to a continued rise in food store prices.

Commenting on the retail sales figures, ONS senior statistician, Rhian Murphy says: "Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector. This can partly be attributed to a background of generally rising prices.”

Murphy continues: "Growth in the quantity of sporting equipment, games and toys being bought was offset by falling food sales when compared with the same month a year earlier. Sporting equipment sales have grown more than usual in January following an increased uptake for gym wear.".

Richard Lim, Chief Executive, Retail Economics says: “Following a wave of profit warning and job cut announcements, these figures confirm a terrible start to the year for retailers. Indeed, the worst January since 2013. In part, inflation has proved stickier than expected, remaining at uncomfortably high levels for many households. As spending on essentials eats into personal finances, consumers have continued to cut back on discretionary spending elsewhere."

Lim continues: “But wider issues continue to dominate retail boardrooms. The cost environment facing retailers is fiercely hostile. They face spiralling operating costs with increases in business rates, National Living Wage and property all in the pipeline. Against a backdrop of soft consumer demand and shifting consumer behaviour towards online and the experience economy, we expect many retailers are under intense pressure.”

Keith Richardson, managing director retail sector at Lloyds Bank Commercial Banking, adds:“Even January’s cold snap wasn’t enough to tempt shoppers to splash out revamping their winter wardrobes as retailers saw their year get off to a frosty start. Consumers were already tightening their belts at the end of 2017 by bringing most of their Christmas shopping forward to Black Friday to make the most of the sales. Now it looks like they’ve started 2018 in cautious mood with subdued spending.”

He continues: “Even the supermarkets – which have led the way in the past 12 months in terms of persuading shoppers to keep spending despite sluggish wage growth – are finding things harder, with the value of food sales rising slower than prices, suggesting that even when people are spending more, they are buying less.

“If the Bank of England’s predictions are right about inflation levelling off and assuming consumers do start to loosen their purse strings, the big question is will retailers still be able to persuade them to spend any extra money on tangible products rather than experiences?”

Lisa Hooker, PwC’s Consumer Markets leader says: “It’s not surprising January was a tough month for the retail sector as consumers were nervous heading in to 2018. When we polled consumers at the end of 2017, more people expected to be worse off this year than better off. UK consumers have been increasingly pessimistic every December since 2015, reflecting the ongoing squeeze on real earnings.



"While inflation has eased in the grocery sector compared to last year, we’re starting to see higher prices affect consumer spending behaviour, with supermarket sales volumes declining year on year after the bumper Christmas period. One in four shoppers expect to buy more food on promotion, and one in six plan to shop in a cheaper store, according to our consumer sentiment survey.



"Nearly one in three consumers say they’ll spend less on ’big ticket’ purchases this year, with shoppers of all ages planning to cut back. Given January is traditionally the time of year Britons think about new furniture and doing up their homes, this has affected the performance of household goods retailers. On top of this, many shoppers spent money on themselves over the Black Friday period in November, cannibalising the traditional January sales."



IMAGE Phil Champion at Georgraph and licensed for reuse under Creative Commons Licence

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