News for Wholesalers and Traders

Retail Dips in January: Cost of Living Strains Sales Amidst Weather Challenges

Rainy shopping street
Unfavourable weather conditions deterred consumer spending

In January, retailers faced a lacklustre period with subdued sales, largely influenced by the escalating cost of living and unfavourable weather conditions, which deterred consumer spending.

Data from the British Retail Consortium (BRC) and KPMG revealed that overall retail sales in the UK saw only a modest increase of 1.2% compared to the same period last year, a notable decrease from the 4.2% growth seen previously.

While initial discounts in January spurred spending during the first half of the month, this momentum failed to be sustained throughout the entire period, according to the BRC. CEO Helen Dickinson emphasised the persistent weakness in sales of significant purchases like furniture and household appliances, attributing this to the prolonged impact of high living costs over the past three years.

Dickinson also noted a sluggish performance in clothing and footwear sales, contrasting with a slight uptick in sales of health and beauty products.

Meanwhile, Linda Ellett, Head of Consumer Markets, Leisure, and Retail at KPMG UK, described the overall performance of the high street as “lacklustre”, pointing out that the anticipated positive impact from declining mortgage rates and inflation had yet to materialise.

Additionally, the latest BRC-NielsenIQ Shop Price Index revealed a decrease in shop price inflation to its lowest level in two years, with food inflation experiencing its ninth consecutive monthly decline. Shop prices eased to 2.9% in January, down from 4.3% the previous month and below the three-month average of 3.9%.

Amazon Delaying Payments to Worried Sellers

Amazon building
Sellers will now have to wait for a week after the product is delivered to access their funds

Concerns are mounting for thousands of small businesses operating on Amazon’s marketplace as the retail giant alters its payment procedure. Previously, Amazon sellers in the UK and continental Europe enjoyed the benefit of immediate account credit upon making a sale. However, a recent announcement has left these businesses anxious about their financial future, as Amazon has extended the payment processing time.

Under the new system, sellers will now have to wait for a week after the product is delivered to access their funds, as opposed to the previous three-day waiting period. This delay, outlined in a letter seen by The Guardian, is acknowledged by Amazon as a potential “one-time cashflow disruption”.

Many business owners have expressed serious concerns over the change, with some fearing potential bankruptcy. The alteration means that a significant portion of their revenue could be held by Amazon for an extended period. For instance, a single business reported having over £100,000 “locked in Amazon”.

Around 15% of Amazon’s small and medium-sized businesses across Europe and the UK, roughly 33,750 in total, could be affected by this policy shift. However, an Amazon spokesperson defended the change, asserting that over 85% of sellers in Europe would not face any impact. They emphasised that the policy aims to standardise reserve practices to ensure sellers have adequate funds to cover potential financial obligations like customer claims or product returns.

Amazon’s decision comes after the company proposed modifications to its treatment of third-party sellers on its platform in response to concerns raised by the Competition and Markets Authority. This change aligns with broader industry trends, as Etsy also recently garnered attention for holding 75% of sellers’ earnings for a 45-day period, sparking criticism from sellers.

Why Your Returns Policy Matters: Sustainability and Brand Awareness

Supply Chain Shipping Containers
It’s vital for retailers to invest in supply chain improvements and sustainability initiatives

Recent research carried out by Advanced Supply Chain and Sapio suggests a shift in consumers’ attitudes to returns. An increase in returns, the so-called “returns crunch”, was supported by the research, with 51% of retailers experiencing an increase in returned items. Yet there was also an increase in consumers’ concerns over the environmental impact of returning a high volume of goods, suggesting a delicate balancing act for retailers.

While retailers focus on addressing the increase in returns, there’s a risk that long-term priorities like sustainability could be neglected, which could in turn negatively impact their brand identity. 

However, the consumers also have a role to play. The research highlighted a shift in consumer environmental awareness, leading them to consider the impact of their purchases and returns on carbon emissions. Shoppers are increasingly linking their buying habits to their environmental profile, leading to more thoughtful ordering and reduced returns due to sustainability concerns.

Sustainable returns are therefore becoming a crucial battleground for retailers. As environmental consciousness increasingly impacts upon purchasing and return behaviour, according to Ben Balfour, Chief Operating Officer at ASC, it’s vital for retailers to invest in supply chain improvements and sustainability initiatives. Currently, only a small percentage of returned items are successfully resold, and many end up in discounted channels or even landfills.

To compete successfully on sustainability, Balfour recommends a holistic approach, addressing sourcing, transportation, storage, dispatching and returns using modern, transparent supply chain software. By making necessary changes now, retailers can avoid falling behind, maintain brand equity, and secure future sales.

Changes to European Shopping Habits

Online shopping
Online Shoppers are Cutting Costs

New research conducted by payments services leader Worldline reveals shifting online shopping habits in Europe. Consumers are adjusting their behaviour to save costs, with price, coupons and discounts being crucial factors in their decision-making process. Despite cutting back on online spending, shoppers are still embracing new technologies that enhance their shopping experience, while seeking personalisation and convenience through subscription services. 

The survey, which involved 6,000 respondents across six European countries, identified the rising cost of living as the top concern. Although  77% of consumers shop online at least once a month, 56% are purchasing less than before. They are also more price-conscious, as the number of shoppers actively utilising discounts and coupons reached an all-time high of 43%.

Cross-border online sales are on the rise, driven by the pursuit of cheaper products and better value. Around half of the consumers surveyed regularly buy from international markets. Payment methods are also evolving, partly as a consequence of this international trend. While bank cards remain popular, they face increasing competition from digital wallets and alternative payment methods. The rise in cross-border sales and alternative payment methods is largely being attributed to the younger shopping demographic.

Personalisation is another significant factor influencing consumer behaviour, with tailor-made products and discounts contributing to customer loyalty and their overall willingness to buy. 

Looking ahead, consumers expect augmented reality (AR), virtual shopping assistants and social commerce to shape the future of ecommerce. While retail is likely to change around concepts like metaverse shopping, live shopping (e.g. purchases made during an influencer’s livestream) , and V-commerce (voice shopping, e.g. using Alexa or Google Home), there is no consensus yet on exactly which of these will take the biggest market share.

Rate of inflation falls for groceries, but shoppers are still feeling the squeeze

Woman buying groceries supermarket
Shoppers feel the squeeze

The UK’s grocery inflation has fallen to its lowest rate this year, standing at 16.5%, according to the latest data. While this marks a decrease from the previous month’s 17.2% and March’s record high of 17.5%, it remains the sixth-highest level since the 2008 financial crisis.

The steepest price increases included eggs, cooking sauces, and frozen potato products. High food inflation continues to put pressure on household budgets, leading people to adapt their eating and cooking habits. Shoppers have been opting for supermarkets’ own-label products, resulting in a 41% increase in their sales compared to last year. Additionally, consumers are simplifying their meals, relying more on microwavable meals than utilising their ovens.

Rising grocery prices have become a top concern for nearly 70% of households along with increasing energy bills. To mitigate the impact, consumers are seeking clearer pricing and urging supermarkets to stock essential budget ranges in all stores. Reports also indicate that the popularity of £1 items has declined, with retailers offering value at different price points, such as £1.25 and  £2.

Meanwhile, the government has declined to support caps for food prices, with Jeremy Hunt claiming that it wasn’t the “the right long-term solution”.

Increase in UK retail sales for the first time in three months

UK Secondhand Shop
Secondhand shop sales increase due to cost-cutting consumers

Sustained customer demand and new business in service sector companies have contributed to growing confidence in the retail sector. 

Following a poor final quarter in 2022, economists expect GDP to grow by about 0.2% in the first quarter of the year.

Rather than cutting back on spending altogether, consumers are being increasingly careful with their money, choosing to eat and drink at home, rather than eating out. Similarly, figures suggest increased spending in discount department stores and secondhand shops.

In comparison to January, non-food sales such as clothing and household goods also benefited from a 2.4% sales increase, while data from The Office for National Statistics (ONS) indicated a rise of 1.2% in overall retail sales, a return to pre-pandemic levels.

Four-day week option for Sainsbury’s staff

A weekly schedule
Companies in the UK experiment with four-day week

Sainsbury’s staff up and down the country have been given the option to work their 37.5-hour contracts in a seven-day week. The new flexibility would mean that some employees could work on a Saturday and take a day off during the week, or alternatively, work longer hours on weekdays. 

The move comes amidst a growing number of UK companies trialling a four-day week. Over 90% of those companies have since extended their trials with just under a third making the move permanent. 

Whilst the numbers of companies trialling the four-day week has increased, they have taken different approaches on how to implement the policy. At Sainsbury’s, the staff are prohibited from taking off consecutive Fridays. There is also the possibility that there will be restrictions depending on whether the retailer’s employees work in stores or head offices. 

A spokesperson for Sainsbury’s said, “We are currently testing new ways to be more efficient and offer improved flexibility.”

UK inflation dips but remains in double figures

A calculator and coins
Figures reveal prices increasing at a slower rate

The U.K. inflation rate fell to 10.1% in January, lower than had been predicted by some economists. However, the double figures spell further strain for households and consumers. 

The biggest increases, according to the Office for National Statistics, were in housing, energy, and the food and drink sectors, which was in contrast to the decrease in rates for transport, restaurants, and hotels.

Unfortunately, this doesn’t necessarily translate to prices decreasing, but suggests that they are increasing at a slower rate. Coupled with a comparative lag in wage inflation (5.9%), it’s clear the UK isn’t out of the woods yet. 

For retailers, positive growth in the first half of the year may well be as a result of this persistently high inflation, masking a potential decline in sales volume. While this also applies to the second half of the year, there is hope that higher growth in sales may bring retailers some much-needed positivity.

Retail sales in January impacted as UK shoppers remain cautious

Budgets tighten in the face of further economic uncertainty

Tight budgets are believed to be the cause of a slowdown in January sales, as cautious shoppers anticipate further rises in household prices.

January has seen sales from December halve to almost 4% according to Paul Martin, UK Head of Retail, KPMG. Signs of a strong start to the year in the clothing and energy efficient appliance industry have done little to boost spirits amidst the backdrop of wider concerns about the short-term outlook for retailers.

“Retailers face a tightrope as their costs rise and margins are squeezed, “ Martin said, ”whilst at the same time having to ensure affordability and value for customers. Although retailers have demonstrated resilience over recent years, it is likely we will continue to see casualties both online and on the high street this year.”

However, the public may have had their fill of doom and gloom, with the Shopper Confidence Index rising to its highest level in a year, suggesting a more “upbeat mood” according to Susan Barratt, CEO at the Institute of Grocery Distribution,

“With the Prime Minister pledging to half inflation in 2023, coupled with our prediction that food inflation will slow this year, just 33% of shoppers expect food prices to get much more expensive compared to 53% last August.”

Tesco has “fallen out” with suppliers over price rise claim

Shopping Trolleys
Tesco suppliers unhappy with Chairman’s remarks

On Monday, Tesco Chairman John Allan suggested that some food suppliers may be using inflation as an excuse to increase prices further than necessary.

The supermarket’s Chairman has since received pushback from suppliers and the Food & Drink Federation, who say that suppliers are also dealing with a huge increase in costs.

The FDF’s Chief executive Karen Betts argued that suppliers are having to “justify exactly line-by-line” their cost increases to supermarkets and rejected suggestions of “profiteering”.

The row comes amidst hopes that the UK inflation rate may have peaked, which would be welcome news for both the retail industry and its customers, with inflation currently sitting at its highest point in decades.

Retail shoppers return to the UK high street in highest numbers since pandemic

Retail shopping street at night
Footfall in December 2023 jumped 15.1%

While many areas of retail haven’t returned to their pre-pandemic levels, December 2022 saw encouraging signs of a steady recovery in the number of shoppers taking to the street. New data reveals that footfall in December jumped 15.1%, making it the highest level since the pandemic began.  

The cold snap and numerous strikes may have put some off travelling far for their Christmas shopping, but many retailers shopped locally instead. The postal strike also appeared to force last-minute shoppers to take to the streets rather than rely on internet shopping, according to BRC chief executive Helen Dickinson.

Dickinson was still cautious about the figures, drawing attention to the fact that the increased footfall was still 10% lower than pre-pandemic levels, but adding that it was a “significant improvement”.

Christmas Spending Cuts

Christmas Spending Cuts
Christmas Spending Cuts

In a further blow to struggling retailers, a Redfield & Wilton Strategies poll reveals that 65% of consumers fear they will have to curtail their festive spending on presents and festivities this year due to the ongoing cost of living crisis.

Households are facing soaring energy bills, an inflation rate which has topped 10 per cent, the sharpest rise in food costs in 40 years with bread, cereal, meat and dairy prices all climbing and the threat of a huge rise in their mortgage rates in the wake of recent economic turmoil.

Thousands of corner shops to close due to rising energy costs

Thousands of corner shops to close due to rising energy costs
Thousands of corner shops to close due to rising energy costs

The Association of Convenience Stores (ACS) has written to chancellor Nadhim Zahawi saying that its members will be driven out of business without financial support.

“We will see villages, housing estates, neighbourhoods and high streets lose their small shops,” the letter says.

The ACS has suggested its own measures for the government to take in the form of a rescue package. The package includes an emergency price cap on electricity for small businesses and a freeze on further increases in business rates.

A government spokesperson responded by drawing attention to their recent employment allowance, cuts to fuel duty and freezing business rates. 

James Lowman, ACS’s chief executive, pointed to the unprecedented nature of their intervention, saying that their case could not be overstated,

“ACS does not usually forecast large-scale closures of convenience stores, but we are in all seriousness doing so now.”

Autumn Slowdown in Retail Sales Looms as Inflation Skyrockets

Retail sales rose by 1.6% in July 2022 compared to July 2021 with the recent heatwave prompting consumers to spend more on summer clothes and picnic food. However, the figures are not adjusted for inflation and represent a fall in volume terms according to the British Retail Consortium (BRC). Inflation hit a 40-year high of 9.4% in June, and July’s figures will be revealed later this month.

The summer is set to be “the lull before the storm,” with Helen Dickinson, Chief Executive of the BRC, stating that “Consumer confidence remains weak, and the rise in interest rates coupled with talk of recession will do little to improve the situation.”  She further predicts that a consumer spending slowdown is inevitable as shoppers will have to “prioritise essentials.”

Working From Home Revolution Could Cause Permanent Damage to High-Street, Springboard Says

Working from home has “permanently scarred” the UK’s high street, according to Springboard.
If working from home continues at its current levels, the data company has warned that UK retail footfall would suffer as a result – remaining at a permanent level of 10% below pre-pandemic levels.
There was initial optimism that the Jubilee bank holiday weekend would provide a much-needed boost to footfall, but figures show that visitor numbers only hit 80% when compared to the same week in 2019.

Speaking to The Telegraph, Springboard’s Chief Executive, Diana Wehrle, said of the working from home revolution: “It impacts footfall because workers are simply not in towns or cities as much. So, of course, it’s going to keep footfall lower than it would have been, had everyone gone back to their offices full time.

“Unless that changes, there will be a permanent scarring and certainly permanent change in the way we shop,”

She added: “In my view, until or unless there is a substantive return to the office by employees, then footfall will continue to remain at circa 10% below the 2019 level.”

However, it’s not all doom and gloom. Wehrle claimed that working from home had provided a boost to local economies, with remote workers re-discovering their local high-streets.

“The changes aren’t necessarily wholly detrimental,” Wehrle said. “But it does mean that retailers need to be aware of the changes that are happening”.

Shop prices hit their highest level in more than a decade last month, driven by soaring food inflation

Food inflation has spurred the highest shop prices in more than a decade in May, as the British Retail Consortium warns that things will get worse before they get better for consumers.

Helen Dickinson OBE, BRC Chief Executive, explained “Retailers have been working hard to protect their customers from these rising costs, particularly at a time when households are being impacted by a huge rise in household energy bills. It is likely to get worse before it gets better for consumers with prices continuing to rise and a further jump in energy costs coming in October. With little sign that the cost burden on retailers will ease any time soon, they will be left with little room for manoeuvre.”

Shop price inflation accelerated to 2.8% in May, up from 2.7% in April, which marks the highest rate of inflation since July 2011. Food was the big driver of rising shop prices, up 4.3% in May, a big jump from the 3.5% in April.

NielsenIQ head of retailer and business insight, Mike Watkins, said the increase in prices reflected that retailers can no longer absorb the supply chain costs that are hitting the industry.

“Promotions remain close to an all-time low and price cuts rather than volume-based offers such as multibuy are now the best way for retailers to help their shoppers manage their household budgets,” he added.

Retailers Urged to Start Planning for New HFSS Regulations

The new High Fat Salt and Sugar (HFSS) regulations are set to be introduced on 1st October 2022 and will affect any stores of 2000 sq. ft. or over. They will mean that HFSS products can no longer be promoted in key store locations such as checkouts, store entrances, aisle ends and any online equivalents and will have a huge impact on retailers.

However, the chief executive of the Association of Convenience Stores (ACS), James Lowman, is urging the government to re-think, stating “Going ahead with the location restrictions in October this year, costing thousands of pounds per store, will have a huge impact on thousands of small businesses that are already struggling to make ends meet.

“Retailers cannot absorb these costs; they will ultimately have to pass them on to their customers during the same month that everyone’s energy costs are set to skyrocket.”
A ban on TV adverts for HFSS products before the 9pm watershed and on paid-for adverts online has, however, been delayed to January 2024.

Online sales tax has the ‘overwhelming support’ of retailers

Early in 2022, the government revealed that it would start a consultation on an online sales tax policy. The consultation is due to close on 20th May.

Research has shown that 71% of retailers with online presence support the tax whilst only 54% of those surveyed believe that click-and-collect sales should be subject to the tax.
John Collier, Head of Business Rates at property specialist Colliers, says “It certainly seems there is overwhelming support to bring in some sort of online sales tax to try and level the playing field and take the full burden of business rates off bricks and mortar retailers”.

However, Claire Davenport, Notonthehighstreet’s chief executive, believes that an online sales tax would be a “mistake” and penalise small firms already battered by the pandemic and that it would come at the worst time for small business owners, with many having shifted online due to the Covid-19 pandemic or set up internet ventures after losing their jobs in the crisis. “Penalising small businesses that are trying to follow a trend that’s happening in the market is not right.”

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