Analysis: Retail sales fall for a record fifth consecutive month

Shoppers have continued to steer clear of the high street with retail sales volumes falling for the fifth consecutive month – the longest continuous stretch on record, according to official statistics. The drop was due to a fall in sales volumes in non-food stores, with lighting and furniture businesses the hardest hit, the Office for National Statistics (ONS) said.

Sales volumes in September were down 0.2%, following a 0.6% fall in August, although they remain 4.2% above pre-pandemic levels in February 2020.

Fuel sales rose in the final weeks of September as panic buying led to many forecourts running dry after suppliers said the HGV driver shortage was affecting deliveries. Fuel sales rose 2.9%. Food sales volumes were also up by 0.6%, the ONS added, and remain 3.9% above pre-Covid levels.

But while shoppers opted to avoid high streets, sales online continued to rise and now account for 28.1% of all spending – up from 27.9% in August.

There was a particular surge in department store sales online, up by 3.8%, meaning nearly 10p in every £1 spent online goes to the likes of John Lewis, Debenhams, Selfridges or House of Fraser, the ONS said. By comparison, household goods stores saw a 3.6% drop in online sales.

Darren Morgan, ONS director of economic statistics, explained: “Household goods were the main driver of this month’s decline, with a fall of nearly 10%, while food sales ticked back up after falling last month.

“Petrol sales exceeded their pre-pandemic level for the first time, with filling stations reporting very strong sales during the last week of September.

“Despite the lifting of restrictions, in-store retail sales remain subdued, with many consumers still opting to shop online.”

Retail chiefs laid the blame at the doorstep of Government and urged ministers to find ways to reduce the issues with supply chains and high energy costs. While experts believe that sales could pick up in the next month, this could simply be a case of stealing volume from December, as shoppers make their Christmas purchases early.

EY UK and Ireland retail expert Silvia Rindone said: “Over recent years, shoppers have tended to wait until late December to buy for Christmas in the hope of bagging some great bargains. However this year, with news of supply chain disruption and supply concerns for key products, shoppers are likely to pull forward their non-perishable Christmas spending into October and November to make sure they get what they want.”

Clothing sales are expected to pick up as more workers return to the office but calls from health chiefs to re-institute working from home advice for office workers due to rising Covid-19 could dampen demand.

Retail experts and analysts' response

British Retail Consortium CEO Helen Dickinson

“Retailers will be concerned by the slump in sales, just as they begin their preparations for the all-important Christmas period. Fuel shortages, wet weather and low consumer confidence all contributed to lower consumer demand this month, with household goods, furniture and books all hit particularly hard.

“For the sake of the UK’s economic recovery, it is vital that retail sales bounce back as we near the festive season. Labour shortages across the supply chains, on farms, factories, warehouses and lorry drivers, all threaten to derail this recovery and it is vital that Government finds a long-term solution to this problem.

Deloitte head of retail Oliver Vernon-Harcourt

“September saw a slight fall in retail sales values and volumes – down 0.2% and 0.4%, respectively. This marks the longest period of consecutive downturn, despite overall sales remaining higher than pre-pandemic levels. Even as more workers returned to the office in September, this was not enough to significantly lift High Street footfall.

“With many consumers unable to fill up their car as a result of empty forecourts, some may have turned to online grocery delivery instead, boosting online food sales by 0.2% this month – up 2.1% year-on-year - to take an overall share of 10.6%.

“Overall online sales also lifted this month, accounting for 28.1% of all retail sales. This figure remains high indicating that lockdown shopping habits are continuing, reflecting a new online base. Pressures on travel and convenience as we enter the colder months will likely sustain this online preference, putting Christmas 2021 on track to be the most digital Christmas ever.

“Consumers are keen to make up for last year’s lost Christmas celebrations and, those that can, will spend more money over the festive period. Public awareness of supply chain disruption means some consumers have already made a start on gift shopping amid concerns around the availability of some goods.

“However, many retailers have anticipated this, bringing Christmas lines in early to avoid a stock nightmare before Christmas. An extended Christmas shopping period should also ease the usual demand peaks, making it more manageable for retailers.

“Deloitte’s latest Consumer Tracker, out on Monday, indicates that pent-up demand as a result of last year’s lockdowns will slow going into the retail sector’s ‘Golden Quarter’. Consumers indicate that their net discretionary spending will fall five percentage points over the coming three months. This appears to be more of a ‘normalisation’ of going out expenditure, rather than a drop in food and non-food spending.

“With inflation and the cost of living on the rise, it remains to be seen whether consumer spending changes in the months ahead because they want it to, or because it has to.”

Barclays head of retail & wholesale Karen Johnson

“Retail sales may have fallen again slightly last month but volumes are still over 4% higher than their pre-pandemic levels of February last year and we can expect to see a return to some kind of normality over the next few months. The pleasant temperatures during most of September, which had the British public heading for days out and more dining out, doesn’t appear to have had the same effect on consumers outdoor shopping intentions though their confidence to continue spending saw online shopping hold its own as expected.

"Looking ahead, retail sales should regather some momentum, particularly in clothing, as more people return to office and also because this winter, unlike last, consumers will actually need a winter wardrobe. As households look to entertain the extended family and friends once again this Christmas, we can also expect refreshing of home interiors and a reversal of last month’s fall in sales of household goods. There are clearly pressing challenges for the sector which will have to remain flexible in its response to ongoing supply chain issues and inflationary pressures.”

New West End Company CEO Jace Tyrrell

“After such a challenging year, we are disheartened to see that retail sales are down 0.2% from last month, indicating that a gradual return to normality is still far from reach for retailers across the country. We hope a busy upcoming Christmas period will offer some confidence to West End businesses as they gradually recover sales.

“If retail sales are to grow, we require more support. We rely heavily on overseas visitors to spend in the West End and maintain appeal for global brands. But we are currently at a major disadvantage, compared to other destinations such as Paris, to entice overseas visitors back to the Capital. We are therefore calling on the Government to explore a simplified visa process and review the restrictive Sunday Trading hours policy. Now is the time to give retailers and visitors alike more freedom as this announcement is clear evidence that we are still far behind where we need to be.”

Image: London's Oxford Street, October 2021, TheIndustry.fashion