SRC & KPMG: Inflation shadows Scottish retail sales growth ahead of ‘golden’ season
Scotland has witnessed superficial growth in retail sales, increasing by 6.1% in the five weeks leading up to 30 September 2023, compared to the same period in 2022, slightly down from the previous year’s 6.5% growth.
However, when adjusted for the prevalent inflation, with both the SPI and CPI indicating above-average levels, real-term sales depict a more stagnant picture, essentially remaining flat with a marginal year-on-year decline of 0.1%.
Ewan MacDonald Russell, head of policy & external affairs at the Scottish Retail Consortium, said: “Scottish retail sales were essentially flat in real terms in September as cautious customers continued to focus on necessities.
“Nonetheless, this was a better picture than elsewhere in the United Kingdom, driven in part by more seasonable weather. Grocery sales did well with customers seeming to prefer to cook hearty meals at home rather than venture out into the dreich weather; indeed food sales were up in real terms despite food inflation slowing.”
He continued: “Fashion and clothing did better than in recent months with customers stocking up their autumnal wardrobes. However, retailers continue to find shoppers are reluctant to purchase full-price products, instead only buying when the right discounts are available.
“Similarly with consumer confidence still heavily depressed larger or high value furniture and electrical products performed poorly.
“Trading is likely to remain very challenging in the coming months as households grapple with higher winter energy bills alongside their existing outgoings. For retailers, the challenge will be trying to maintain sales volumes without succumbing to the temptation to start discounting stock too early ahead of Christmas.
“Government can help by looking to rule out at the earliest opportunities any further measures which will hit the spending power of modest and less affluent Scottish households.”
Paul Martin, partner and UK Head of Retail at KPMG, said: “Scottish retailers have defied the odds with a sales growth surge in September, rising to 6.1% from 5.6% in August. The fashion and food sectors emerged as the stand-out performers, thanks to a shift in weather patterns and the onset of colder temperatures. This growth sharply contrasts with the lacklustre retail sales seen across the UK last month, possibly attributed to unseasonably warm weather postponing traditional consumer spending trends.
“Despite the growth, sales are still being dented by inflationary pressure, and after years of battling adversity, the resilience of the retail industry is being tested. We’re seeing a growing divide between the strongest and weakest players on the high street, making the impending battle for Christmas shoppers likely to be very intense this year. We are already seeing early and abundant promotions aimed at loosening tight household budgets and consumers are focused on securing the best deals, with pricing playing a pivotal role in purchasing decisions. This upcoming holiday season may prove to be one of the most critical ‘golden quarters’ in recent memory, as the fate of many in the sector hangs in the balance.”