Retail sales slow as consumer confidence wanes and food sales struggle

Sales growth in March rose at the slowest rate so far this year, according to the latest BRC-KPMG Retail Sales Monitor, as consumer confidence continued to sink.

Sales increased by 3.1 per cent in March on a total basis, driven by a strong performance across most non-food categories.

But this likely reflects higher prices as the figures are not adjusted for inflation. Both the March SPI (BRC) and February CPI (ONS) have showed that inflation is running at historically high levels.

Over the three months to March, food sales decreased 2.6 per cent on a total basis and decreased 3.1 per cent on a like-for-like basis. For the single month of March, Food was in decline year-on-year.

Non-food retail sales increased by 14.9 per cent on a total basis and by 8.6 per cent on a like-for-like basis during the three-month period. The category was in growth year-on-year in March.

Non-food online penetration rate decreased to 38.5 per cent in March from 63.0 per cent in March 2021. However, it was up 9.2 percentage points on the 29.3 per cent seen at the same point in 2019.

Helen Dickinson, chief executive of British Retail Consortium (BRC) noted that much in-store retail has not recovered to its pre-pandemic level.

“The rising cost-of-living and the ongoing war in Ukraine has shaken consumer confidence, with expectations of people’s personal finances over the next 12 months reaching depths not seen since the 2008 financial crisis,” she said.

“Furthermore, households are yet to feel the full impact of the recent rise in energy prices and national insurance changes. There is also potential for further supply chain disruption, with China putting key manufacturing and port cities into lockdown. Ultimately, consumers face an enormous challenge this year, and this is likely to be reflected in retail spend in the future.”

Don Williams, Retail Partner at KPMG, added: “Retailers are facing their own battle with rising costs and inflation, and are walking a tightrope between absorbing rising costs themselves or passing these on to consumers, when competition for share of a shrinking wallet is increasingly fierce.

“The best retailers will continue to balance attention on areas that can yield cost and efficiency gains with a clear understanding of their customer and what they want to buy and how. The primary concern now is whether consumers will choose to reduce their physical and virtual shopping to counteract rising household bills and reduced household income.”

Commenting on the food and drink sector performance, Susan Barratt, IGD chief executive, said: “Food and drink sales struggled in March, partly due to facing strong comparatives to 2021. Not only were sales elevated last year due to lockdown, but Easter was also earlier and we’re yet to see holiday spending ramp up this year.

“It is no surprise that shopper confidence continues to fall and is now lower than the previous low of December 2013 when the horsemeat scandal impacted the food industry. There was a brief peak in confidence when it looked like oil prices might come down, but with 50 per cent of shoppers now expecting food prices to become much more expensive, this optimism was short-lived. These challenges affect shoppers in different ways, with household cutbacks seeing less affluent shoppers skipping meals to save money. This volatile time is set to continue as the reality of the energy price increase, as well as general inflation, hits home for shoppers.”