Retail reacts to April 2022 ONS data: "retail sales are being squeezed"
The Office for National Statistics (ONS) revealed that inflation had hit 9% in the year to April today, measured by the Consumer Prices Index (CPI). The rise in inflation is thought to be the highest figure recorded in 40 years.
Following months of slowdown, online sales grew for the first time this month since January, rising to 27%, up from 26% in March amid a rise in holiday bookings.
Purchases from clothing, footwear and department stores made up the biggest proportion of online retail sales, with textile, clothing and footwear stores making up 26.2% of online retail sales in April and department stores sales reaching 21.7%.
Key experts across the fashion and retail industry reacted to the Office for National Statistics April 2022 data:
Oliver Vernon-Harcourt, Head of Retail at Deloitte:
“Despite expectations, the arrival of April’s warmer weather and the first bank holiday barbecues of the year have fired up retail sales, as both values and volumes rose by 1.9% and 1.4% respectively, driven by food sales and the first Easter free of COVID-19 restrictions.
“Strong clothing sales indicate consumer demand to refresh wardrobes, and the return of large gatherings drove higher food and alcohol sales. For those consumers that can afford it – typically those in higher income households – spending has accelerated in areas such as leisure, eating out and holiday bookings.
“However, just because overall spending is rising doesn’t mean that this is true for everyone and higher income households are likely to account for a disproportionate share of spending. Over half of UK consumers have already seen an increase in their overall personal expenditure since the start of the year and, with inflation hitting a 40-year high just this week, spending power could weaken further for many in the months ahead.
“With all remaining COVID-19 restrictions now lifted, this may point to a new post-pandemic baseline for online sales. We will continue to see retailers seek new ways of blending the digital experience in-store this year through digital products and services.”
Huw Phillips, Head of Sales at Deko:
“The 1.4% uptick in sales volumes will be a welcome relief for many retailers following the fall of 1.2% in March. Although this is part of a wider downward trend over recent months, it is positive that there has been a buck in consumer activity even in the face of inflationary pressures.
“April’s performance was largely driven by increased sales in food stores. However, non-store sales volumes also rose by 3.7%, reflecting a good month for online-only retailers. This is a notable turnaround from the fall of 6.9% in March. This bodes well for ecommerce, and further reinforces the extent to which customer behaviours have shifted towards online retail following the pandemic.
“Merchants can take confidence from April’s boosted sales volumes, but should also use this as an opportunity to upgrade their operations to ensure that increased consumer activity can be sustained. This might be through improving ecommerce platforms or optimising payment options both in-store and online.”
Helen Dickinson, CEO of the British Retail Consortium:
“Retail sales are being squeezed by a combination of low demand, high inflation and rising costs. The fall in demand comes as consumers reign in their discretionary spending following a significant reduction to real incomes for households across the UK. Meanwhile, retailers face higher food and commodity prices, increased shipping and transport costs, and the tightest labour market in decades.
“Retailers are working hard to support their customers by keeping costs down where they can, and expanding affordable ranges, however it is impossible to mitigate all the costs coming through their supply chains. Until inflation is brought to heel, and consumer confidence returns, retailers could be in for some difficult times ahead, with lower demand and reduced margins.”
Alan Thomas, UK CEO at Simply Business:
“A surprising boost in retail sales will support the thousands of small business owners who are still in the crucial post-pandemic recovery phase. Not only are they battling rising costs, but also supply shortages, soaring energy bills, and a loss of customers.
“The eye-watering cost of COVID-19 for SME owners, including lost work, earnings and loan repayments, now sits at a total of £109.6 billion. While many SME owners have been able to recoup some losses, our latest study found one in ten (12%) face going bankrupt in the coming months.
“When addressing the cost of living crisis, the government cannot forget the crucial role every small business owner plays to the health of our country. To avoid a recession, it's vital that small businesses are given the support they need to bounce back.”
Silvia Rindone, Ernst & Young UK and Ireland Retail Lead:
“The latest figures from the ONS show that retail sales volumes rose by 1.4% following a fall of 1.2% in March 2022, as consumers made the most of the good weather over the Easter bank holiday weekend. Despite the increase in monthly sales, the overall trend for the three months to April 2022, shows that retail sales volumes fell by 0.3% when compared to the previous three months, continuing the downward trend since summer 2021, as consumer spending continues to slow.
“The figures underline the challenges ahead for UK retail. In its Spring Forecast, the EY ITEM Club said that it expected consumer spending would rise 4.9% in 2022, down from the 5.1% and 5.6% growth predicted in March and February. The rising cost of living is affecting almost all households, but it is having a disproportionate impact on those at the lower end of the income scale.
“Consumers are now making more considered decisions about how to spend their money as a result of the squeeze on their finances. We expect significant ‘trading down’ to ‘own-label’ brands, repeating what we saw in the 2008-9 financial crisis, but we also expect an increasing focus on ‘value for money’ options as sustainability-conscious consumers look for purchases that will last.
“Retailers are now facing a combination of high inflation and supply chain and demand headwinds which will create a challenge for the sales growth that has helped drive the post-pandemic recovery so far. Earlier this month, EY-Parthenon’s profit warning analysis found that FTSE Retailers have been most affected by rising costs and supply chain challenges, with UK-listed retailers issuing nine profit warnings in Q1 2022 – the highest quarterly total since the start of the pandemic.
“Retailers will need to ensure they respond quickly to consumers’ concerns and select the right value strategy for their business to retain cost conscious shoppers. This could include exploring ways to reduce their own cost base and range rationalisation to reduce supply chain costs.”
Dr Jackie Mulligan, Government High Streets Task Force expert and ShopAppy Founder:
“People are clearly spending more on staying in, and more did it from their sofas in April. The shift online is here to stay and the beneficiaries appear to be billion pound businesses rather than the small independent ones that line our high streets. The three month period to April is a far better gauge of what's happening. Strong sales of alcohol, tobacco and sweets may well highlight the growing anxiety among households. We work with and hear from thousands of small independent retailers around the country and it’s devastating to see a growing number of them have to shut up shop for the last time. This isn’t a cost of living crisis, it’s a cost of living catastrophe.
“Small independent retailers, many of whom have lots of debt that they accrued during the pandemic, are being kicked while they’re down and this time no one is stepping in to help. 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. With inflation at 9% and expected to get higher, people are understandably cautious or simply don’t have the money to spend on anything bar the necessities, and it has the potential to kill off the high street. We’re urging people to shop local whenever they can, and spend their money with small businesses not the billionaires.”
Walid Koudmani, Chief Market Analyst at XTB:
“UK retail sales surprisingly grew by 1.4% in April on a monthly basis compared to market expectations of a small fall. When removing the impact of price changes, retail sales grew by 1.9%.
“This reading is better than anticipated and many will hope that this is a sign that the UK economy could be in a stronger position than feared. I think that's a bit too early a conclusion to take but certainly this reading is helpful and shows UK consumers are not yet shying away from spending despite inflationary pressures. This data does however contradict UK consumer confidence data by GFK, which fell to its lowest level on record. Therefore I would caution that we could be seeing consumers bring forward purchases such as clothing to avoid paying higher prices later when inflation is expected to top 10%.”