Retail sales fell 1.6% in August, latest ONS data shows – Retail Times

Retail sales volumes fell by 1.6% in August 2022, according to the latest figures from the Office for National Statistics. The sales drop continues the downward trend seen since summer 2021, following the lifting of restrictions on hospitality. In recent months, rising prices and cost of living are also affecting sales volumes, the ONS added.

All main sectors (food stores, non-food stores, non-store retailing and fuel) fell over the month; this last happened in July 2021, when all legal restrictions on hospitality were lifted.

Non-food stores sales volumes fell by 1.9% over the month because of falls in each of its sub-sectors: other non-food stores (negative 2.8%), department stores (negative 2.7%), household goods stores (negative 1.1%) and clothing stores (negative 0.6%).

Non-store retailing (predominantly online retailers) sales volumes fell by 2.6% in August 2022; despite this fall, sales volumes were 24.4% above their February 2020 levels.

Food store sales volumes fell by 0.8% in August 2022, which leaves them 1.4% below their pre-coronavirus (COVID-19) levels in February 2020.

Automotive fuel sales volumes fell by 1.7% in August 2022; these were 9.0% below their February 2020 levels.

The proportion of retail sales online fell to 25.7% in August 2022 from 26.3% in July 2022; despite this fall, it remains significantly above pre-coronavirus levels (19.8% in February 2020).

Silvia Rindone, EY UK&I retail lead, comments: “With shoppers challenged by inflation, the rising cost of living and falling consumer confidence, the drop in retail sales volumes in August by 1.6% was unsurprising. Shoppers are now taking decisive action by opting for ‘own-label’ alternatives or switching to discount supermarkets which have continued to win market share.

“Online sales continued their downward trajectory, falling 2.6% in August as growth in the sector stabilised. However, they are still well above pre-pandemic levels, as shoppers continue to return to high streets and shopping centres. Many pure-play retailers have also been experiencing slowing sales growth, alongside high commodity prices, increasing delivery costs and product returns. Discretionary spending on ‘big ticket’ items like furniture declined in August; a trend which is likely to continue as shoppers prepare for the energy price rises in October.”

Trilemma for retailers

Rindone adds: “The challenge for retailers now is how to prepare for the all-important ‘golden quarter’. They are facing an unprecedented ‘trilemma’ of rising costs, slowing demand and excess supply creating challenging trading conditions. Many businesses, particularly fashion retailers, overestimated demand and have been left with excess stock which they are selling at a heavy discount to try and improve cash flow and working capital.

“It is critical that retailers review their pricing strategy – it’s now no longer a choice but essential to their long-term survival. Many are already doing this by introducing value orientated ranges to capture consumers who are trading down, but still want a compelling customer proposition. Valuable customer insight will also enable them to make decisions about range rationalisation and product delisting to create efficiencies.

“Retailers need to consider the impact of wage inflation and how this is absorbed in their pricing strategies. Government financial support for the spiralling cost of living crisis this autumn may help temper the impact of weakening consumer confidence and offer consumers some much-needed breathing space in the run up to Christmas, but overall demand is still likely to be dampened.”

Lynda Petherick, retail lead at Accenture in the UK & Ireland, said: “With a difficult winter to come, it will come as a worry to retailers that shoppers have already reined in their spending despite the hot summer.

“The sombre atmosphere in the UK this week and news of slow economic growth will be adding to the sense of concern among retailers as the weather gets colder. Rising costs remain front of mind, and brands will be doing all they can to minimise outgoings and protect their margins for the months ahead. To avoid a winter of discontent and beyond, technology will be crucial to helping retailers find a careful balance between product, price and experience to keep customers coming back for more.”

Oliver Vernon-Harcourt, head of retail at Deloitte, said: “Amidst deepening concerns around the cost of living and high levels of inflation, sales values and volumes fell 1.7% and 1.6% respectively in August.

“All sectors saw a fall over the month, particularly large ticket items such as household goods, likely due to concerns over affordability. Many retailers would have hoped that back to school and end of summer spending would have boosted non-food categories. However, non-food volumes fell 1.9%, with consumers cutting back on non-essential items across all categories to curb growing costs.

“Retailers, who are also battling rising costs, may be revising expectations ahead of the critical Golden Quarter, with ongoing uncertainty amongst consumers around how much they will be able to spend over the coming months. In this case, it may get worse before it gets better. However, the festive period will be an opportunity for retailers to showcase the best they have to offer to attract consumer spending.”

Impact on small businesses

Government High Streets Task Force expert and ShopAppy founder, Dr Jackie Mulligan said: “People just aren’t spending amid the cost of living crisis. They’re tightening their belts and then some. Retailers selling non-essentials are in a highly precarious position with inflation where it’s at. The family businesses that line our high streets are being seriously challenged at present and this comes on top of two arduous years. They are facing a triple whammy of rising costs at home, rising costs in their business and financially squeezed customers who are spending less. The best thing we can all do is shop with them because any purchase from a local shop is an investment in our communities.” 

Racheal Straughan, director of the Newcastle upon Tyne-based small retailer e-commerce marketplace, Mayfli said: “All of the small businesses on our platform have taken a huge hit to their sales in recent months, as consumers are only buying essentials. People are still trying to support local where they can but the likes of Amazon who offer huge discounts and make it so easy to buy are incredibly difficult for small retailers to compete against. The online giants of retail have a merciless monopoly.”

Barry Whitehouse, owner at Banbury-based art shop, The Artery said: “Sales in recent months have been the lowest we have seen in 12 years. Online sales have dried up, sales in the shop are much quieter, and we are seeing weekly takings across both online and in-shop at levels at least 50% lower than before the pandemic. Customer numbers are down around 70% each week. We are reaching the point where we can no longer cover our overheads, and wages seem like a fantasy rather than a reality. We are seeing some product prices rise almost every few months, and as we have very low margins, we have no choice but to pass the increases on. We are doing all we can to hold on in the hope things will improve, and we are so thankful for our regular customers and students who are choosing to support real life independents instead of the faceless online giants. We have seen some available grants but they were match funded. We couldn’t apply as we have no money left to match. If we had the money to match, we wouldn’t need the grant. It’s the ultimate Catch 22. How long I have left in business is anyone’s guess.”

Natalie Ormond, founder of Leeds-based sustainable lifestyle store, Smallkind said: “As a small online retailer, orders have dropped dramatically since March when energy price rises hit the news and have been poor throughout the summer. I’m trying to stay optimistic about the second half of the year and am hoping the Christmas season brings in more orders as I stock sustainable toys and childrenswear. But with energy prices set to go up again in October I fear that people’s budgets will get even tighter and it’s the fast fashion and discount stores that will be busy rather than small ethical brands like mine. Small retail businesses desperately need the Government to address cost of living increases if we’re to survive this year.”

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Retail sales volumes fell by 1.6% in August 2022, according to the latest figures from the Office for National Statistics. The sales drop continues the downward trend seen since summer 2021, following the lifting of restrictions on hospitality. In recent months, rising prices and cost of living are also affecting sales volumes, the ONS added.…