Scotland’s retail sector facing 'very difficult' summer after sales flatline as shoppers focus on essentials

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales grew by 8.8 per cent last month, compared with March 2022. This was just below the three-month average increase of 9 per cent but once adjusted for inflation, last month’s year-on-year change was -0.1 per cent. Consumer price inflation is running at historically high levels, with a surprise jump in February, from an annual rate of 10.1 per cent to 10.4 per cent, when most analysts had been expecting a fall. Figures for March are imminent.

Ewan MacDonald Russell, deputy head of the SRC, said: “Scottish retail sales remained flat in March with a miniscule drop by 0.1 per cent in real terms on the previous year. The 8.8 per cent rise in sales was more than offset by increased inflation as the cost of living continues to increase for hard-stretched households. The figures show consumers cutting back on discretionary spending to focus on essentials. Consequently, high street retailers continue to find trading challenging with shoppers spending focused on sales and discounts.

“Retailers will hope Easter brings a small boost. However, the outlook remains very difficult for all businesses. In these circumstances any new costs imposed on businesses will be passed directly to consumers. Therefore we hope to see the Scottish Government focus on making growing Scotland's economy the priority of priorities rather than adding to that cost burden.”

The latest monitor showed that total food sales, by value, increased by 14.3 per cent last month, against March 2022, though much of that gain will have been driven by rising prices. Total non-food sales increased by 4.1 per cent, year on year. Adjusted for the estimated effect of online sales, total non-food takings rose by 3.4 per cent.

Paul Martin, partner and UK head of retail at KPMG, which helps to produce the monthly sales monitor, said: “As inflation continues to offset any true sales growth in Scotland, and the cost of living crisis continues to bite, the picture for the retail sector remains stagnant as we approach the summer months. High street retailers saw some limited growth across most categories in March but consumers are actively cutting back and instead spending more on home comforts. Rising utility costs, council tax and mobile bills coupled with frozen personal tax rates and the withdrawal of energy bill support will see consumers having to further curb discretionary spending as we move through April.”

He added: “Of course, some retailers are delivering growth and will be optimistic of their performance, although this is largely down to taking share from competitors through customer insights and innovation rather than any overall growth. The challenge for retailers now is having to face into their own rising cost agenda, as inflation continues to challenge margins, whilst ensuring affordability, choice and value for customers.”

Measured on a like-for-like basis, which strips out store openings and closures, sales increased by 6 per cent last month, before being adjusted for inflation.