Retail reacts to May 2022 ONS data: "small businesses need help"

The Office for National Statistics (ONS) revealed that consumers reined in their spending in May amid belt-tightening due to the cost-of-living crisis.

The Office for National Statistics (ONS) said the drop in retail sales over the month came as signs mounted that the cost-of-living crisis is beginning to take its toll on the economy.

The ONS also revised down sales growth in April, from the 1.4% previous estimation to an increase of 0.4%. The data showed a pull back in spending on household goods and in department stores, with sales dropping 2.3% and 1.1% respectively, as shoppers worry about affordability.

Data did however show a 2.2% increase in clothing sales, offset by a fall in household goods.

Key experts across the fashion and retail industry reacted to the Office for National Statistics May 2022 data:

Oliver Vernon-Harcourt, Head of Retail at Deloitte:

“Falling retail sales volumes and rising values reflect the 40-year high inflationary pressures weighing on consumers’ pockets, with shoppers buying less but spending more.

“However, the strong recovery in travel has led to some consumers spending more in some of the non-food categories, particularly in clothing and footwear, with clothing sales volumes up 2.2% in May. Moreover, the return of large-scale events following pandemic restrictions have provided the perfect opportunity for consumers to refresh their wardrobes and return to socialising in style.

“Of the consumers currently spending less, one in three are ‘trading down’ by choosing cheaper brands, items, stores, or activities. Retailers must stretch their product range further from budget to premium, with price ‘elasticity’ to match.

“The share of online sales slowed in May, to 26.6%, down from 27.1% in April, but still remains higher than pre-pandemic levels. In-store, footfall also suffered, with consumers perhaps avoiding unnecessary car journeys due to record fuel prices.

“Retailers will need to provide incentives for consumers to visit their stores, such as click-and-collect services, and offer the best value for money and the most desirable selection of goods.  For the month of June, the question remains whether spending during the Queen’s Platinum Jubilee celebrations will have helped increase traffic to high streets and online stores.”

Alan Thomas, UK CEO at Simply Business:

“With soaring energy costs and the ongoing cost of living crisis, it's no wonder that we've seen a decrease in retail sales. The slight rise in April 2022 was short lived, with geopolitical developments affecting the cost of raw materials, food and petrol. Unfortunately, it’s sole traders and micro-businesses who'll have to absorb most of the pressure.

“It's never been more stark – small businesses need help. Small retail businesses are still in recovery mode as a result of sporadic lockdowns, and they desperately need to drum up trade. We're now facing the highest inflation levels for 40 years, crippling energy prices, and huge rises in the costs of petrol and consumer goods. Unsurprisingly, consumers are unwilling to spend their money.

“The country's six million small businesses will play an essential role in the UK's economic recovery. We know that SMEs were hit hard by COVID – on average, small business owners have lost £22,000 each in lost earnings since the pandemic began. As we face an uncertain future, it's more important than ever to support small businesses on their route to recovery.”

Helen Dickinson, CEO of the British Retail Consortium:

“Households reined in spending as the cost-of-living crunch continued to squeeze consumer demand. Many customers are buying down, particularly with food, choosing value range items where they might previously have bought premium goods. High value items, such as furniture and white goods, were also impacted as shoppers reconsidered major purchases during this difficult time.

“Higher operational and input costs have filtered through to prices, meaning both retailers and their customers are in for hard times ahead. Retailers are doing what they can to support households by absorbing as much of the costs as possible, expanding their value ranges, offering discounts for some vulnerable groups, and investing in their own supply chains to reduce future costs. If costs continue to spiral, Government will need to be ready to support struggling households.”

Dr Jackie Mulligan, Government High Streets Task Force expert and ShopAppy Founder:

“For the small retailers that line our high streets, the cost of living crisis is a disastrous sequel to the pandemic and lockdowns of the past two years. In the current brutal economic climate, sales are dropping by the day. These businesses are loved by communities, but they are also often family-run, which means they are experiencing a double whammy of costs rising at home and in their own shops.

“Our message to consumers is that local shops offer good value and, just as importantly, spending local will help our communities to survive this latest crisis. It's better to spend with a small local business than a distant billionaire. We know local independent retailers are resilient, but the current level of inflation, coupled with rising costs across the board, is placing them under extraordinary pressure. We’re seeing shops moving off the high street to go purely online or shutting up shop all together, which is a loss to communities long term.”

Heather Bovill, ONS Deputy Director for Surveys and Economic Indicators:

“Retail sales fell in May driven by a decline in food sales. Feedback from supermarkets suggested customers were spending less on their food shop because of the rising cost of living. More workers returning to the office may have contributed to increased fuel sales this month, while shoppers buying outfits for summer holidays helped boost clothing sales.

“These rises were offset by falls for household goods and department stores, with retailers in these areas reporting consumer reluctance to spend due to affordability worries and higher prices.”

Lynda Petherick, Retail Lead at Accenture:

“Today’s slight drop in sales won’t come as a surprise to a sector contending with rapidly rising costs, as well as pressure to keep prices low for struggling households.

“Inflation remains a key issue for retail businesses, who are having to grapple with growing supply chain costs, as well as keeping their stores afloat and staff well compensated. For consumers, rising costs for staple goods mean many don’t have excess money to spend on discretionary items.

“There have been calls to help consumers by keeping prices down, which will be easier said than done for retailers. Increasing costs will have left many firms short this summer, particularly at a time when customers are usually spending more. Retailers with the right technology in place to help keep costs down whilst delivering a good customer and employee experience are more likely to weather the storm than those who don’t.”