SRC & KPMG: ‘Blue Christmas’ ends worst year for Scottish retail sales

Retail sales in Scotland took a significant turn for the worse in the final month of 2020, falling further into decline with 16.6% on a total basis, according to the latest Scottish Retail Consortium (SRC) and KPMG Scottish Retail Sales Monitor.

SRC & KPMG: 'Blue Christmas' ends worst year for Scottish retail sales

This brought the curtain down on a catastrophic year for Scottish retail, as the year overall saw a decline of 12.8%, by far the worst since the series began in 1999.

During the month, the general trends seen over the course of the coronavirus crisis persisted once more, with Food remaining in growth – albeit slowing to 3.3% - while Non-Food remained in decline. Although this does not do the collapse of Non-Food sales justice, as it slumped to its worst performance since June, with -33.4%.

The majority of the damage to Non-Food sales occurred during the end of the month, as increased festive period social restrictions were announced in the run-up to Christmas. This also caused Hogmanay to be a smaller affair than in previous years, with limited congregations stifling demand for alcohol and party foods in the final week.

Covering the 5 weeks 29 November 2020 – 2 January 2021, Total sales in Scotland decreased by 16.6% compared with December 2019, when they had decreased by 0.6%. This was below the 3m average decline of 12.2% the 12m average decline of 12.8%. Adjusted for deflation, the decrease was 14.8%.

In December, Scottish sales decreased by 15.6% on a like-for-like basis compared with December 2019, when they had decreased by 1.5%*. This is below the 3-month average decrease of 11.0% and the 12-month average decrease of 11.3%.

Total Food sales increased 3.3% versus December 2019, when they had increased by 2.4%. December was below the 3-month average growth of 4.1% and the 12-month average growth of 3.8%. The 3-month average was below the UK level of 7.3%, while the 12-month average was below the UK’s levels of 5.4%.

Total Non-Food sales decreased by 33.4% in December compared to December 2019, when they had decreased by 3.1%. This was below the 3-month average decline of 25.8% and the 12-month average decline of 26.5%.

Adjusted for the estimated effect of Online sales, Total Non-Food sales decreased by 17.7% in December versus December 2019, when they had increased by 1.5%*. This is below the 3-month average decline of 10.2% and the 12-month average decline of 14.4%. Those are lower than the UK’s 3m average decline of 1.5% and 12m Total average decline of 5.0% respectively.

Paul Martin, partner, head of retail at KPMG, said: “It would be an understatement to describe December’s figures are potentially devastating for the industry. The final run-up to Christmas offered Scotland’s High Streets the opportunity to regain some lost ground, but our data suggests sales stuttered throughout the month, before falling sharply in the final few days and weeks of December. Increasing Covid cases, ongoing restrictions and a tightening of rules on social gatherings appear to have seriously dented any prospects of short-term recovery.

“Throughout 2020, non-food retailers bore the brunt of the pandemic and December’s figures reinforce that fact, with year-on-year sales down more than 33% - the worst result since June. 2021 will undoubtedly be one of the most challenging years ever for Scotland’s retail sector, but there is some light at the end of the tunnel for the businesses with adequate cash flow and a focus on adapting alongside evolving consumer behaviour.

“We’re not out of the woods yet, but we can at least hold on to some cautious optimism that a vaccine rollout may result in a gradual increase in consumer spending and footfall.”

David Lonsdale, director at the SRC, added: “Scotland’s retailers are in the depths of the biggest crisis in two decades after the worst ever December trading. Retail sales fell in real terms by 15%, the worst since June, as lockdowns at the start and end of the month snuffed out hopes of a late rally to end the year.

“Food sales remained positive but recorded their second weakest monthly performance since the Spring, underwhelming considering the lack of competition from eateries. Non-food sales from stores slumped dramatically, by over a third compared to the same period the previous year. Closed stores for much of the month coupled with the loss of the post-Christmas discounting period clobbered non-food shops, removing the final chance for them to tempt customers and shift unsold stock.

“Online sales fared well and blunted the decline somewhat for non-food categories. It was a Blue Christmas for retail – and with shopkeepers missing out on much of the golden trading quarter the pressure on those businesses is reaching boiling point.

“It isn’t just down to weak Christmas trading. Across 2020 sales fell massively – far and away the worst figures SRC has reported during twenty two years of the survey. This fall can be clearly attributed to the repeated lockdowns and weak economy; and the bleaker picture compared to the UK as a whole shows how retail has suffered from longer lasting lockdowns and restrictions.

“Tough restrictions may be right to tackle Covid – but need to be matched with support for the industry – and so a firm commitment in the Scottish Budget to further business rates relief is a must.

“Ministers need to look hard at how they can lift the burden on an industry which has been reduced to its knees by the current crisis, as even when we emerge from lockdown shops will be unable to trade at capacity due to physical distancing and caps on shoppers in stores.”

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