Retail sales fall continues sector’s dismal run

UK retail sales fell again last month to set a record streak of monthly declines according to the latest figures from the Office for National Statistics. Retail sales volumes dropped 0.9% last month following a 2.8% fall in July, dashing hopes of a 0.5% increase in August.

Food sales dropped sharply as consumers instead spent more at newly-reopened venues immediately after the end of lockdowns for bars, restaurants and entertainment spaces. General lack of consumer confidence in shopping while the virus remains in circulation, combined with stock problems caused by supply disruptions have also impacted on retailers across the industry.

Oliver Vernon-Harcourt, head of retail at Deloitte, said: “Many businesses talk about ‘waiting for the new normal’, but the reality is that consumer behaviours have now steadied, and this is the new normal. In August, online purchases accounted for 27.7% of all retail sales, compared to nearly 20% pre-pandemic. As a result, retailers are wrestling with the conundrum of where to invest and where to allocate capital, whether in-store or online. Many retailers are also experimenting with new ways to improve the consumer experience and remain attractive to, for example, the more conscious consumer, including zero waste trials and hybrid shopping.

“A perfect storm of labour shortages, supply chain issues and increased demand will continue to test retail leaders as we enter the Golden Quarter. Christmas will be impacted by these headwinds; there will very likely be shortages in some categories which will force consumers to make different choices. Retailers – particularly grocers – will have to decide which products to put on the shelves, prioritising higher-margin products where possible. Managing price increases and stock shortages will be one of the main challenges retail leaders will have to address in the coming months.”

Lisa Hooker, consumer markets leader at PwC, said that the post-lockdown bounceback in retail spending appears to be running out of steam, with retail sales slipping back in August compared to July, and barely increasing (+1.4% excluding petrol) compared to this time last year. “Retail sales fell in almost all categories of spending, and particularly in supermarkets as Britons took full advantage of the re-opening of hospitality, with eating out ahead of last year.

“However, while the initial pent-up demand has started to ease, retail sales continue to be well ahead of pre-pandemic levels (+7.4% compared to February 2020), as forced savings during the pandemic and cancelled foreign holidays mean that consumers have more to spend on the high street and online.

“In fact, the proportion of retail sales online actually nudged up slightly in August to almost 28%, compared with under 20% before the pandemic. This suggests that the increased footfall on high streets last month predominantly benefitted hospitality rather than shops, as witnessed by the mass closure of multiple retailers that we found in our latest Store openings and closures report.

“As we head into Autumn, retailers will be hoping that back-to-school and back-to-the-office will be a sign of back-to-normal for consumer demand, and also that the current supply chain pressures ease, as few of them can afford another cancelled Christmas.”

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