Cost of living crisis ‘already hitting’ Scottish retail sector


Summer retail sales in Scotland stagnated as the value of workers’ real wages continued to fall at a record pace.

Figures released today by the Scottish Retail Consortium (SRC) show that while the period of warmer weather in the four weeks to July 30 boosted sales of summer clothing and similar items, it will is “much” done at the expense of other articles. Sales of discretionary products such as housewares, furniture and major electrical appliances remained “very weak”.

The SRC data comes a day after the Office for National Statistics (ONS) released its regular monthly UK employment and earnings data. It showed workers suffered a record 4.1% drop in real wages in the three months to June, as CPI inflation hit 9.4% last month.

Ewan MacDonald-Russell, deputy director of the CBC, said all the evidence suggests the cost of living crisis is already hitting high street.

Ewan MacDonald-Russell

“In real terms, Scottish retail sales were stagnant… as a modest increase in the value of sales was wiped out by the impact of record high inflation,” he said.

“Grocery sales rose 5.3% as shoppers increased their grocery budget, but that masks the reality that customers’ books are buying less product. Retailers saw shoppers shift their food purchases to buy more outdoor food to take advantage of the sun, but that was instead of other purchases.

He added it was a similar story for high street retailers: “While summer clothing and items sold well, it was very much at the expense of other items. It seems that customers focus on what they need at the time of purchase.

“This meant that even heavily discounted off-season or discretionary products were ignored in favor of shoppers who only bought what they felt was needed at the moment.”

READ MORE: Labor market belies underlying reality for Scottish workers

Seemingly determined to take advantage of a delayed vacation and the first unrestricted summer with mild weather, total unadjusted sales were up 4.4% from July 2021. However, after accounting for inflation, the change on one year was zero.

Apart from this turnover on total sales, the SRC data is not adjusted for inflation. On this basis, total food sales increased by 5.3% compared to the previous year, while non-food sales increased by 3.7%.

The SRC was careful to warn that with inflation reaching historic highs, “some of the growth in sales will be a reflection of higher prices rather than increased volumes”.

Paul Martin, head of retail at KPMG, noted that consumer confidence polls are currently at an all-time low.

“While this [retail sales] growth is positive, it is likely to change as consumers return from summer vacation to holiday credit card bills, another rise in energy prices and rising interest rates,” did he declare. “With these stronger cost-of-living headwinds on the horizon, consumers will need to prioritize the essentials, and discretionary product spending will be under pressure.

READ MORE: Lack of strike sooner leaves Bank of England behind the inflation curve

“As margins continue to be challenged and costs continue to rise, a significant fall in demand in the fall will negatively impact the health of the retail industry. Successful retailers will need to carefully anticipate customers’ buying habits in the coming months and ensure they balance their offer with the right products, prices and promotions.

A survey carried out last week by Simply Business found that more than half of small and medium-sized businesses in the UK cited rising fuel and energy costs as one of their biggest threats to their survival. According to the Federation of Small Businesses, costs are at an all-time high for 89% of small businesses.

“The more shoppers reduce discretionary spending, the more difficult things will become for already beleaguered retailers,” MacDonald-Russell added.

“These businesses are also facing huge inflationary pressures which are exacerbating the difficult trading environment. Unless governments act quickly, the winter could be harsh for Scottish traders.”


About Author

Comments are closed.