The retail sector in the UK enjoyed a strong start to the year, boosted by accelerating inflation and a comparison with the lockdown period last year when most non-food shops were closed. However, the data from the BRC-KPMG Retail Sales Monitor was accompanied by a warning that the cost of living crisis was likely to result in shoppers tightening their purse strings in the months ahead.
On a total basis, sales increased by 11.9% in January, against a decline of 1.3% in the same month in 2021.
Over the three months to January, non-food retail sales bounced back with a total increase of 11.1% and a 6.5% rise on a like-for-like basis as consumers returned to stores.
However, against tough comparatives with bumper trade in supermarkets last year, food sales decreased 0.1% on a total basis and by 0.5% on a like-for-like basis.
“It is encouraging to see such strong sales in January, even once inflation has been accounted for,” said BRC Chief Executive Helen Dickinson.
She highlighted that food sales were more muted than in previous months, as people went back to eating out more often. Meanwhile, consumers prioritised home purchases, boosting the sale of furniture, household appliances, electronics, and homeware.
However, Dickinson warned that retailers and consumers were facing challenging times in the coming months: “Retailers face competition from other spending opportunities as the public flood back to restaurants, cafes and live events. Furthermore, rising inflation, driven by higher costs of production, higher energy and transport prices, as well as other looming price hikes this Spring will mean consumers will have to tighten their purse strings.”
Commenting on the muted food sales, Susan Barratt, IGD chief executive, said: “After a welcome uptick in food and drink sales at Christmas, 2022 has started on a downbeat note with sales struggling to match those of January 2021. Although it was always going to be a hard benchmark as we were in the peak of a third national lockdown in January last year, with food and drink sales surging as a result.”
She noted that the new year has brought increased shopper anxiety due to the cost of living crisis: “Our ShopperVista insight reveals that 89% of shoppers expect food to get more expensive in the year ahead. Coupled with the energy price cap set to rise sharply from April, some 39% of shoppers expect to be worse off financially in the year ahead, up 8% from last month. Therefore, we can expect more shoppers to increasingly focus on tightening their spending in the months ahead.”
Separate figures released today by Barclaycard covering the wider area of consumer spending – taking in the hospitality and leisure sectors as well as retail – showed growth of 7.4% compared with 2020. That was the weakest growth figure since April last year, with the impact of Omicron restrictions, which were still in force at the start of the year, partly blamed.
NAM Implications:
- The key issue for all is consumer anxiety in 2022…
- …with all the known forces depressing demand.
- Opportunity for brands that can optimise relative competitive appeal.
