Just when you thought you’d heard the last of the Beast from the East, the meteorological phenomenon has drifted back into discussion this month after a sharp decline in retail expenditure was reported during March. The biggest takeaways from the recent retail statistics from March are discussed below.
1. Inflationary pressures squeeze disposable income
As detailed in a report from the British Retail Consortium and KPMG, a clear divide between food sales and sales of other items was apparent in March. Whilst over the three months until March, the amount spent on “other items” fell by 3 per cent, spending on food rose by 5.3 per cent. A CBI survey showed that department stores, shops selling recreational goods and furniture retailers were amongst the worst hit.
Inflationary pressures and a squeeze on real income, triggered by weak wage growth, have impacted heavily upon levels of disposal income and spending habits, with UK consumers spending more on household essentials in March. On the other hand, less was spent on other items last month despite high levels of promotional activity, and the usual fertile retail ground associated with the period before Easter.
These inflationary pressures come following a sustained period of high inflation in the UK, which spiked sharply in 2017 due to the impact of a slump in the sterling following the Brexit vote.
2. The Beast from the East leaves its mark on UK retail figures
These retail statistics also highlight the impact of the Beast from the East on UK shopping, with this year’s most infamous Siberian weather front (in a fairly packed field, may I add) deterring shoppers from spending on non-food items. One key factor, here, is the significant decline in petrol sales in March, which has had knock-on effects with retail spending, keeping shoppers indoors. The impact of this has been further exacerbated by disruptions to public transport over this period.
The effect of this has been felt throughout the UK retail market, with John Lewis, for example, reporting a 16 per cent decline in mid-March sales when compared with the same week in 2017 due to a combination of poor weather conditions, and promotional activity commencing earlier this year due to the earlier Easter break.
3. The online retail market continues to shoulder the burden
Online retail has similarly felt the chill, with online sales figures at their lowest in almost a decade, according to a survey of 109 firms by CBI. This is despite record internet traffic during March due to large numbers working from home, with CBI pointing to a reluctance by consumers to place orders for fear that deliveries would be delayed.
Nonetheless, online sales accounted for 17.4 per cent of all sales in March 2018, compared with 15.9 per cent in the same month last year, suggesting that those with a strong online presence are likely to have fared better than their exclusively brick and mortar peers in March. As Paul Martin, head of retail at KPMG, stated: “unless you’re a grocer, bridging the gap between online and offline sales offers the best means of success in this climate”. This highlights the value of maintaining an online presence, as well as the importance of online shopping to the wider retail market by helping to take on some of the strain when factors, such as poor weather, contribute towards lower footfall in shopping centres.