Retail sector faces ‘bumpy road’ amid cost-of-living crisis – report

Retail sales were close to pre-pandemic levels last month, although the cost-of-living crisis is making the recovery more challenging, according to a new report.

The SRC-KPMG Scottish Retail Sales Monitor showed that total sales in Scotland increased by 15.3% in April this year compared with April 2021, when they had grown by 107.9%.

However on a three-year basis they were 0.5% down on the same month in 2019, before the pandemic.

The monitor has provided comparisons with April 2019 as in April last year non-essential retail stores were closed for most of the month, pushing many consumers to buy goods online.

David Lonsdale, Scottish Retail Consortium (SRC) director, said: “The value of Scottish retail sales was marginally down in April compared to the same period prior to the pandemic.

“Whilst the figures lost a little of their lustre from the more buoyant March, retail sales were still at their second-highest level for two years and remained close to pre-pandemic levels.”

He added: “The retail recovery is still very much in its infancy and the outlook has to be tempered in light of the pressures on consumer spending.

“Household finances are under strain as inflation, tax rises and other bills take a bite out of shoppers’ purses and wallets.

“Disposable incomes simply do not stretch as far as they used to, presenting Scotland’s retailers with a more challenging marketplace.”

The figures showed that total food sales last month increased 2.9% on April 2021, when they had increased by 3.0%.

Looking at the change compared to three years ago, total food sales were up by 3.5% on April 2019.

Total non-food sales increased by 25.7% in April compared with the same month last year, when they had increased by 195.9%.

However they declined 3.9% compared with the same month in 2019.

Mr Lonsdale said that several non-food categories such as clothing and accessories, footwear and beauty products were lifted by the return to office working, more social occasions such as weddings, and holidaying.

However, sales of bigger ticket items including electricals, household appliances and furniture were “lacklustre”, as recent spikes in inflation and taxes left pay-packets lighter.

Paul Martin, UK head of retail at KPMG, said: “The cost-of-living crisis came home to roost for Scottish retailers in April, with sales growth stalling after a relatively promising start to the year.

“Pressure on consumers tightened considerably with the increase in energy tariffs and the higher cost of food and other commodities. Easter holiday spending helped food sales grow, and while they are ahead of pre-pandemic levels, are unremarkable when inflation is taken into consideration.

“Against the backdrop of falling consumer confidence and a possible recession ahead, the retail sector faces a bumpy road with cost pressures from all directions.

“Many retailers may benefit from pent-up demand in the short-term although in the mid-term will have no choice but to raise prices to protect margins.

“But the longer we see high inflation and real household incomes falling, the more likely it is that consumers will change their spending behaviour, prompting a decline in the health of the retail sector and possibly more casualties on the high street.”