Retail sales volumes (quantity bought) are estimated to have risen by 1.7% in January 2025. This follows a fall of 0.6% in December 2024 (revised down from a fall of 0.3% in our last bulletin), according to the latest figures from the Office for National Statistics (ONS).
Food store sales volumes grew strongly in January 2025, following falls in recent months.
More broadly, sales volumes fell by 0.6% in the three months to January 2025, compared with the three months to October 2024, but rose by 1.4%, compared with the three months to January 2024.
“Grocery sales performed particularly well, increasing by 2.9% year on year, albeit partly reflecting higher prices as supermarkets began to pass through inflation to shoppers. Nevertheless, grocery sales volumes still increased by 0.4%.
“Conversely, following a stronger end of 2024 for fashion, helped by widespread discounting, clothing retailers saw sales fall by 2.4%, making this the worst performing category.
“Despite the colder weather, the high street benefited from the fifth sunniest January on record, with footfall recovering. As a result, penetration of online retailers fell from 26.9% in December to 25.7% in January, making this the weakest month for online retailers since the disruption caused by postal strikes in December 2022.
“While January has proven to be a better-than-expected start to the new year, retailers will be hoping that this momentum continues, despite weakening consumer sentiment. The wider economic climate will become increasingly challenging for the retail sector, as input cost inflation rebounds and higher labour costs and business rates increases hit in April.”
Carly Donovan, partner at McKinsey & Company comments: “Consumers reversed the downward trend from December, providing retailers with a boost in sales. Total sales volumes for the month rose by 1.7%, beating forecasts which predicted close to flat growth rates. But, this small sign of optimism should be tempered by the fact that this boost was largely driven by food sales.
“The 5.6% increase in food sales will be welcome news for grocers – driven by consumers choosing to eat at home as they tighten their belts post-holiday season. However, retail sales slightly declined across almost all other categories, with textile clothing and footwear down 2.7% and household goods by 1.7%. This speaks to ongoing challenges with consumer confidence.
“Online sales fell across most categories, with household goods falling by 14% and textile clothing and footwear stores falling by 7%. Whilst this drop in not unusual, it suggests that post-holiday promotions are not cutting through. Even online grocery fell slightly at 0.1%, despite the overall growth in the grocery category.”
Alice Cowley, retail strategy managing director at Accenture, said: “Consumers have kept a tight grip on their purse strings post-Christmas. While Grocery inflation eased for the first time in six months, driving 1.7% growth, it was offset by a decline in household goods and textile clothing and footwear.
This past three-month period has fallen short of expectations for many, as shoppers increasingly prioritised essentials only in non-food categories and turned to own label food products, weakening margins. This, coupled with increasingly bad weather resulted in a subdued January, not the splash retailers will have wished for.
Retailers focus in the months ahead will be on offsetting rising cost pressures from employer national insurance contributions, an increased national living wage, and a new packaging levy without pricing out consumers. To stay competitive, retailers should embrace innovation, streamlining supply chains, investing in technology, and delivering standout customer experiences with the personalisation shoppers expect.”
Silvia Rindone, EY UK&I retail lead comments: “January sales figures had a strong start to the new year, with total UK retail sales volumes estimated to have risen by 1.7% month on month. Following a disappointing Golden Quarter, where sales struggled to gain momentum, the latest ONS data indicates a more stable foundation for retailers as they move into 2025.
“Food store sales volumes in particular saw robust growth in January 2025, recovering from declines in recent months. However, it is important to note that, more broadly, sales volumes fell by 0.6% in the three months leading up to January 2025 compared to the three months ending in October 2024.
“The EY ITEM Club Winter forecast predicts consumer spending will grow by 1.6%, an improvement from the 1% growth observed in 2024. However, the weaker-than-expected end to 2024 means retailers need to remain vigilant in their strategies.
“While macro trends such as growing consumer income in real terms and lower interest rates are positive news, the benefits are not being felt evenly across the retail landscape. Overall growth in the retail sector remains sluggish, masking a mix of both strong and poor performers within every retail sub-sector. Performance is highly variable and largely dependent on how well retailers have optimised their customer offerings—both digitally and physically—over recent years. Those who have not invested in their propositions are now struggling to find the space to invest further in increasingly challenging conditions.
“As retailers navigate an uncertain trading environment, it is essential they build a broader proposition that goes beyond selling products. Designing service offerings that effectively solve customer problems is one example of how they can foster loyalty and drive sales. Additionally, investing in strong brands that drive trust will be crucial for retailers looking to differentiate themselves in a competitive market.
“While January has brought a positive start to the year, the retail sector must remain agile and focused on customer-centric strategies to thrive amidst the anticipated economic challenges ahead.”
