How the post-pandemic spending bubble has burst as figures show sales continue to decline

The post-pandemic spending bubble has burst with sales continuing to see declines as the cost-of-living crunch squeezed consumer demand, according to the British Retail Consortium (BRC).

Sales decreased by 1.1 per cent in May, against an increase of 28.4 per cent in May 2021, on a total basis, the latest BRC-KPMG sales monitor showed.

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While the 2021 figure was skewed by lifting of Covid restrictions, this year’s sales were below the three month average growth of 0.7 per cent and the 12-month average growth of 4.1 per cent.

UK retail sales decreased 1.5 per cent on a Like-for-like basis from May 2021.

High street.High street.
High street.

Over the three months to May, food sales decreased 1.3 per cent on a like-for-like basis and 0.7 per cent on a total basis. While non-food retail sales decreased by 1 per cent on a like-for-like basis and increased 2 per cent on a total basis.

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In-store sales of non-food items grew 31.5 per cent on a total basis and 24.1 per cent on a like-for-like basis, over the same period.

Online non-food sales decreased by 8.5 per cent during the month.

Helen Dickinson OBE, chief executive of the BRC, said: “Sales continued to see declines as the cost-of-living crunch squeezed consumer demand.

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“Higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time.

“Nonetheless, fashion and beauty did well as people prepared for holidays abroad and the summer’s social calendar; with red, white and blue outfits adorning shopping carts ahead of the Jubilee weekend.

“Meanwhile, online sales appear to have stabilised at a ‘new normal’, with the share of total non-food retail sales coming through digital channels settling at around 39 per cent compared with 30 per cent pre-pandemic, though this is well down on lockdown peaks.

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“It is clear the post-pandemic spending bubble has burst, with retailers facing tougher trading conditions, falling consumer confidence, and soaring inflation impacting consumers’ spending power.

“Supply chain issues including rising commodity and transport costs, a tight labour market and higher energy bills are forcing retailers to increase their prices, contributing to wider inflation.

“Profits may be squeezed further, as retailers continue to find efficiencies in their own operations and supply chains to reduce the impact of future price rises for consumers.”

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Paul Martin, UK head of retail at KPMG, said: “For the second month in a row UK retail sales declined, highlighting that consumers are becoming more sensitive to the cost of living.

“Non-food purchases related to the home, such as furniture, home appliances and computing, suffered the biggest falls in spending in May.

“Online, although still significantly higher than before the pandemic, has now experienced a double-digit decline over the last three months.

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“There was better news though for clothing, footwear and accessories sales, with both in-store and online purchasing driven up by the approach of the summer season and the promise of outdoor events and travel firmly on many consumers’ radars.

“The rising cost of living is going to remain the main story for retailers for the immediate future, with consumer confidence a key factor to watch out for.

“Retailers will be hoping that a post-Jubilee and summer feel-good factor begins to improve confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.”

Jubilee joy for retail

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Retail footfall saw a significant improvement over the long Jubilee weekend as more people took to the shops.

Total UK footfall increased by 6.9 per cent over the Jubilee weekend, compared with the average for May 2022, according to BRC-Sensormatic IQ data.

Helen Dickinson said: “It was great to see so many people out celebrating and shopping at their favourite local destinations – a welcome boost for retail businesses reliant on store performance, particularly on the high street.

“We hope that the momentum can continue despite the ongoing economic turbulence.”

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