SRC & KPMG: Scottish retailers brace for tight festive season amid sales slowdown

SRC & KPMG: Scottish retailers brace for tight festive season amid sales slowdown

Scottish retailers have faced a daunting start to the crucial festive period, with total sales rising a modest 2.9% in October 2023 compared to the same month last year, falling below both the three-month and twelve-month average increases.

This uptick in sales, however, masks an actual year-on-year decline of 2.3% when adjusting for inflation. Food sales, though still growing at 7.5%, showed a deceleration against previous months. In stark contrast, non-food sales declined by 1.0%, further impacted when accounting for online sales, which fell by 1.9%.

David Lonsdale, director of the Scottish Retail Consortium, said: “Severe storms and repeated deluges and disruptions combined with lingering cost-of-living concerns to put a real dampener on Scottish retail sales last month. It was a miserable start to retail’s golden quarter.



“The significant weakening was the poorest monthly performance since July and a fourth consecutive month of real terms decline in the value of retail sales.”

Mr Lonsdale continued: “The downturn was seen across all categories but was particularly pronounced in non-food, which saw its first decline since May. The growth in grocery sales continued to reduce, mirroring the fall in food price inflation.

“Lower-priced indulgencies such as cosmetics and fragrances fared well, as did sales of Wellington boots and cold and flu remedies perhaps unsurprisingly given the drookit conditions. Formalwear was a bright spot as people returned to corporate events and prepared for the looming party season, but clothing overall suffered as did sales of larger ticket items including white goods, electricals, and furniture.

He concluded: “Hopefully, the downturn in sales is only temporary. That said, it may continue for a little while yet as indications are that households are delaying Christmas-related spending in the hope of grabbing a bargain during Black Friday discounting.

“With consumers so price-sensitive it is critical that the Chancellor and Finance Secretary in their upcoming Budgets seek to support consumer confidence whilst helping retailers to keep down prices at the tills.

“The marked deceleration in shop price inflation should assist, as should the temporary discounts to peak rail fares and mooted council tax freeze. However, we need to see Ministers rule out a hike in the business rate which would add significantly to shopkeepers’ outgoings and put upward pressure on prices for consumers.”

Paul Martin, partner and UK head of retail at KPMG, commented: “Retail sales remained weak in October with growth of just 2.9% in Scotland, although food and drink and some health and beauty categories continued to drive sales. Online sales continued to struggle compared to the same period last year, which could herald the most competitive Black Friday period that we’ve seen in a while.

“Despite a decrease in inflation compared to last October’s peak of over 11%, the past 12 months have impacted consumer confidence and spending ability. With higher interest rates, diminished COVID savings, and increased heating costs, consumers are now cautious about their expenditures. This has led to a decline in the strong demand that sustained some retailers over the past 18 months.

“The upcoming Christmas season poses challenges for retailers as they compete for a shrinking share of consumer spending through promotions, further squeezing already tight margins. Anticipated lower spending levels make this Christmas season potentially the most challenging since before the pandemic.”

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