Helen Dickinson, chief executive of the British Retail Consortium, said that without action, it would not just be retailers — but also their customers, who pay the price of this rising tax.
Last Friday, the British pound fell to a new 37-year low against the dollar, and UK retail sales fell sharply in August as the rise in the cost of living has continued to hit households.
Ms Dickinson said sales rose slightly in August, though volumes were down significantly as a result of inflation at 10 per cent.
“Consumers cut back on major purchases, such as white goods, as falling real incomes made many people think twice. Retailers are working hard to keep prices down for their customers, despite their own costs rising substantially — including energy, imports, shipping and haulage,” she said.
The British Independent Retailers Association CEO Andrew Goodacre said the latest sales figure decline is evidence the cost of living crisis has crushed consumer confidence.
“The cost of living crisis has damaged consumer confidence and reduced spending, and that is a real concern for independent retailers as we approach the most important time of the year for retail sales,” he said.
“These latest figures show how difficult life is on the high street. If the government needed further evidence that decisive action is needed, they now have it. It is therefore even more disappointing to hear that any help with the spiralling energy costs may be delayed until November, and suggesting that support will be back dated does not help the ‘here and now’ cash flow pressure on small retail businesses.
“We want to see positive statements for the Chancellor next week with details on the support package for businesses and how consumer confidence will be restored.”
Silvia Rindone, EY UK&I retail lead, said the drop in retail sales volumes in August by 1.6 per cent was unsurprising.
“Shoppers are now taking decisive action by opting for ‘own-label’ alternatives or switching to discount supermarkets which have continued to win market share,” she said.
“Online sales continued their downward trajectory, falling 2.6 per cent in August as growth in the sector stabilised. However, they are still well above pre-pandemic levels, as shoppers continue to return to high streets and shopping centres.
“Many pure-play retailers have also been experiencing slowing sales growth, alongside high commodity prices, increasing delivery costs and product returns. Discretionary spending on ‘big ticket’ items like furniture declined in August; a trend which is likely to continue as shoppers prepare for the energy price rises in October.”
Ms Rindone said the challenge for retailers now is how to prepare for the all-important “golden quarter”.
“They are facing an unprecedented ‘trilemma’ of rising costs, slowing demand and excess supply creating challenging trading conditions,” she said.
“Many businesses, particularly fashion retailers, overestimated demand and have been left with excess stock which they are selling at a heavy discount to try and improve cash flow and working capital.
“It is critical that retailers review their pricing strategy — it’s now no longer a choice but essential to their long-term survival. Many are already doing this by introducing value orientated ranges to capture consumers who are trading down, but still want a compelling customer proposition. Valuable customer insight will also enable them to make decisions about range rationalisation and product delisting to create efficiencies.
“Retailers need to consider the impact of wage inflation and how this is absorbed in their pricing strategies. Government financial support for the spiralling cost of living crisis this autumn may help temper the impact of weakening consumer confidence and offer consumers some much-needed breathing space in the run up to Christmas, but overall demand is still likely to be dampened.”
