UK retailers under pressure as post lockdown pent up demand softens

Much like the good old British summer weather, UK retail performance in August was mixed.

According to research from the BRC and KPMG, sales growth on the high street continued to slow, with footfall still below pre-pandemic levels and online sales took a retreat from the highs of last year, whilst some discretionary non-food categories continued their recovery.

On a total basis, sales increased by 3% in August, against a growth of 3.9% in the same month last year. This is below the three month average growth of 6.9% and the 12 month average growth of 10.3%.

Overall, the high street saw 3% growth, dented by lower food sales growth of 1.9% as consumers enjoyed a fully re-opened hospitality sector.

Online sales fell back by -2.5% compared to August 2020, though online penetration rates remained significantly above pre-pandemic levels.

Clothing, footwear and accessories continued their recovery with some healthy sales increases but from a much lower base, whilst technology and furniture/appliance categories suffered against very strong comparatives in 2020.

“With the retail recovery showing signs of slowing, the sector is expected to grow at a more muted rate as retailers face increasing challenges on a number of fronts. Inflation is expected to accelerate putting pressure on household spending, whilst retailers battle for share of wallet as consumers spend money on leisure, entertainment and travel,” says Don Williams, Retail Partner, KPMG.

“Staffing pressures remain and supply chain issues are being widely reported, with raw material shortages and challenges getting product into the UK and getting goods into customers‘ hands. This may feed into limited availability of certain products and the spectre of price rises remains.”

He adds: “Retailers will be pinning their hopes on a more predictable normal with white collar workers returning to city centres in greater numbers from this month and a buoyant Christmas fuelled by some of the savings that consumers have made over the last 18 months of lockdown and restricted spending.”

“Nonetheless, successful retailers will have to work very hard to ensure the right availability of the right product to satisfy the requirements of an ever more demanding customer.”

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