Confident Consumers Fuel Retail Sales Growth

Crowds of shoppers are seen on Oxford Street in London on Dec. 6, 2020. Peter Summers/Getty Images

Consumer confidence improved in August, with retail sales enjoying a boost of 4.1 percent in line with yearly growth.

The latest figures published by the British Retail Consortium (BRC) showed a bounce back in retail sales growth when compared to results a year ago. August numbers were also higher than the three-month average growth of 3.6 percent.

In what comes as a relief to retailers, the strongest performing categories included health, beauty and food and drink.

Food sales increased 8.2 percent on a total basis over the three months to August. This is an increase from the 12-month average growth of 8 percent.

Food and drink sales appear to have recovered from the “momentum lost in July” due to “disappointing” summer weather, said the chief executive of the Institute of Grocery Distribution (IGD) Sarah Bradbury.

During the FIFA Women’s World Cup games that took place from 20 July to 20 August, Britons spent more on food and drink.

However, the cost of food remains a prominent concern among shoppers, faced with the cost-of-living crisis. Although food inflation is at its lowest since September last year, it remains high by historical standards.

Food price inflation, the overall inflation growth and the increasing interest rates have all had an impact on consumer confidence.

According to the IGD’s shopper confidence index, fewer consumers believe that food will get cheaper in the next year and only 13 percent expect food prices to return to their 2021 level.

While the inflation rate, has decelerated in the past months and currently stands at 6.8 percent, it is “still too high,” Chancellor Jeremy Hunt acknowledged last week.

Decreasing the inflation rate means that the extra spending needed by consumers will fall. This will lead to a decrease in sales growth in the coming months, even if volume growth does not, said Ms. Dickinson.

Non-Food Items

The BRC report showed that shopper sentiment has picked up in health and beauty categories.

“Sale of non-food products had their best month since February, particularly for health and beauty products as retailers continued to invest in new, exciting brands, and customers splurged on self-care,” said chief executive of the British Retail Consortium (BRC) Helen Dickinson.

The August figures showed a year-on-year growth in non-food products. This, however, still remained below the 12-month average.

Households were reported putting off purchases of children’s uniforms and other back-to-school goods until the last minute. This affected sales growth in clothing and footwear categories.

The BRC also reported that Britons would buy more in-store–a 1.3 percent growth on a total basis since August last year. This compares to an online sales drop by 1.7 percent, against a decline of 6.1 percent in August last year.

E-commerce accounted for 34.1 percent of UK retail sales in August, a slight decrease from 34.7 percent at the same time last year.

Golden Quarter

As the market enters the last few months of the year, dubbed the “golden quarter,” retailers typically see great sales spikes in the build-up to Christmas.

This year retailers will have to “fight harder for every sale” as shoppers become “more calculated and aware of what they are getting for their money,” said head of retail at KPMG, Paul Martin.

High-interest rates put pressure on households to spend “cautiously,” so savvy shoppers will be Christmas bargain hunting much earlier this year, Mr. Martin suggested.

The retail sector is said to expand budget ranges in response to consumers seeking out good deals. If they want to continue trading in 2024, retailers have to maintain consumer confidence and find ways to cut costs, added Mr. Martin.

The Christmas forecast report by the Retail Week data service has predicted that this year’s “golden quarter” will see strong demand and year-on-year sales value growth in the fashion, beauty and health sectors.