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UK retail sales grew in September – but fell back online: BRC

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UK retail sales grew in September – but sales fell back online, continuing a pattern that has seen shoppers buy less over the internet then they did during the pandemic, the latest figures suggest.

Ecommerce non-food sales fell by 2.6% in September, albeit less sharply than the previous September’s decline of 7.3% – and below the longer term trends over three (-4.1%) and 12 months (-13.8%). Some 38.4% of non-food retail sales took place online in September, down from 40.5% a year earlier.

Total UK retail sales rose by 2.2% last month, compared to a year earlier, when they had increased by 0.6%, according to the BRC-KPMG Retail Sales Monitor for September 2022. That’s above the three months trend (+1.9%) but below the 12 month trend (+2.7%). Retail sales were also 1.8% up on last year on a like-for-like basis that strips out the effect of store openings and closures.

Helen Dickinson, chief executive of the British Retail Consortium (BRC), says: “While UK retail sales grew in September, this represented another month of falling sales volumes given high levels of inflation. As consumer confidence continued to fall, people shopped cautiously, avoiding large ticket items such as new computers, TVs and furniture. Many households are also preparing for higher energy costs this winter, with blankets, warm clothing, and energy-efficient appliances, such as air dryers and air fryers, all selling well.

“A difficult winter looms for both retailers and consumers. Costs are increasing throughout retailers’ supply chain, the pound remains weak, interest rates are rising, and a tight labour market is pushing up the cost of hiring. All of this is making it harder for retailers to reduce prices and help struggling households. The industry urgently needs clarity from the government about business rates next year and is calling for a freeze in the multiplier. Without this, retailers will face an £800mn hike in their bills, which will inevitably put additional pressure on prices for UK consumers.”

While ecommerce sales were in decline, in-store sales of non-food items grew in the three months to September, by 2.2% in total and by 1.1% LFL. Food sales, meanwhile, grew by 4.6% in total over the same period, and by 4.2% LFL. That’s above the 12-month average of 1.1% growth – and likely reflects the impact of food inflation. In September alone, food sales grew compared to last year.

Paul Martin, UK head of retail at KPMG, says: “Retail sales remained positive in September with growth of more than 2% on the same period last year – but much of this will be attributed to increased prices as volume of sales continue to be challenging. Once again, clothing and footwear came to the rescue of the high street, and back to school purchasing was a driver in retail growth figures, with sales of children’s shoes up over 15%.  Sales of household appliances and cooking accessories also moved into positive territory this month, as consumers look to purchase more energy efficient kitchen items in light of rising energy prices.  Online sales remain down year on year, and those categories that did see some growth remained in single figures.

“With interest rates, inflation, labour, energy and costs of goods continuing to climb, retailers are heading into one of the most challenging Christmas shopping periods they have had to deal with in years.  Consumer confidence remains low, and retailers are having to tread a very fine line between protecting their own margins and further denting confidence by passing on price rises.  A laser focus on their own costs and efficiencies in order to remain price competitive this festive season will be essential.  As consumers focus on getting value for money through switching to own brand items and seeking out discounts, getting pricing and promotional activity right could be the difference between a successful or dismal Christmas for retailers this year.” 

Shoppers cutting back on discretionary purchases: Barclaycard

At the same time, Barclaycard figures suggest that shoppers spent 1.8% more in September than they did a year earlier. Since consumer price inflation has been running at 9.9%, that suggests that shoppers have cut back on discretionary purchases. Spending on essential items rose by 3.3% – its smallest lift so far this year – as shoppers although spending on utilities was 48% higher than last year. A parallel survey of 2,000 UK adults found nine in 10 concerned about household bills, and 53% are planning to cut down on discretionary spending. 

Spending on non-essential items grew by 1% on last year. But while 60% say they are cutting back on eating out, 51% say they will spend more time at home, playing board games (25%) or video games (19%) or streaming films and boxsets (20%). 

Esme Harwood, director at Barclaycard, says: “Energy price increases are understandably causing concern for Brits, as they worry whether they will have enough money to cover their household bills.  Consumers are taking a savvy approach to budgeting as they reduce spending on discretionary items and seek more value in their weekly shop, which is having a knock-on effect on retail and hospitality sectors.

“However, Brits are also looking for ways to enjoy themselves at home while saving money, which has led to growth across ‘insperience’ categories such as digital subscriptions and takeaways. It is likely to remain a challenging time for many other sectors as consumers focus on essential spending and businesses continue to navigate inflationary headwinds.”

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