Retail sales volumes (quantity bought) are estimated to have risen by 1.0% in August 2024, following a rise of 0.7% in July 2024 (revised up from a 0.5% rise in our previous publication), the latest figures from the Office for National Statistics show.
Some supermarkets and clothing retailers reported a boost because of warmer weather and end-of-season sales.
More broadly, sales volumes rose by 1.2% in the three months to August 2024, when compared with the three months to May 2024.
Oliver Vernon-Harcourt, head of retail at Deloitte, said: “The late arrival of sunshine and the busy agenda of sporting events in August gave a much-needed lift to UK retail sales, with consumers spending more on summer clothing ranges and food for outdoor socialising. The first cut in interest rates in four years last month saw a rebound in the property market, which might have led to the growth in sales of household goods.
“While many consumers remain cautious and are opting out of purchasing big ticket or luxury items, some are still treating themselves by spending on little luxuries, resulting in a boost in sales of small discretionary items in personal care and in premium food categories.
“This better-than-expected lift to sales will give retailers hope that more consumers will spend consistently in the months ahead. However, many consumers will be awaiting the outcome of the forthcoming autumn budget and further interest rate adjustments before loosening their purse strings entirely. The ‘golden quarter’ is looming, and many retailers will want to see how they perform in their busiest period of the year before releasing the brakes on making more significant investments.”
Tom Youldon, partner, McKinsey & Company comments: “Shoppers continued to loosen the purse strings in August. Warmer weather, summer sales and growing consumer optimism combined to help boost spending.
“Stronger performance in textile, clothing and footwear stores reflect back to school and end of season sales and may contribute to some greater positivity in retailer revenue forecasts.
“Food sales also saw a comeback as people celebrated the end of summer bank holiday.
“However, while consumers are showing a willingness to spend on essential and semi-discretionary categories, consumer confidence has dropped likely reflected in deferring the purchase of big-ticket items.
“The next few months are pivotal. If inflation continues to hover close to the 2% mark, consumers may start to experience a modest increase in purchasing power over the crucial golden quarter. But with higher energy bills on the horizon from October, many will be mindful of making discretionary purchases and continue to look for opportunities to trade down. Retailers will need to closely monitor where consumers are willing to make trade-offs and where they are willing to splurge – using these insights to inform product ranges, availability, pricing and promotional strategies.”
Matt Jeffers, retail strategy and consulting managing director for Accenture in the UK & Ireland, said: “With summer in full swing and back-to-school shopping on the minds of many in August, retailers will be delighted to see a second consecutive month of increased retail sales. The warmer weather saw brands benefit from strong performances in food and clothing sales in particular.
“With Autumn now upon us, September will see new demands for seasonal trends in clothing and food as temperatures cool off and days shorten. Many will now be in a balancing act of discounting summer stock to clear shelves and maintain growth, whilst retaining profit margins. After a nearly a year of inconsistent results without sustained growth, retailers will be looking to capitalise on the changing season, especially with the Golden Quarter on the horizon. Heading into the final few months of the year, their focus will be on competitive pricing, targeted promotions, and enhancing the in-store and online shopping experience to win over discerning consumers.”
Silvia Rindone, EY UK&I retail lead, comments: “The latest figures from the Office for National Statistics continue to paint a complex picture for the retail landscape. Consumers, ever adaptive, are recalibrating their spending habits in response to economic pressures and uncertainty. The tightening of belts has led to a shift in consumer behaviour that isn’t quickly reversible as people grow accustomed to new ways of working and spending.
“August’s retail performance was uneven, with consumer spending diverging significantly across categories, with travel and hospitality faring better than fashion. Retail sales volumes rose by 1.0% in August, with supermarkets and clothing retailers reporting a boost due to warmer weather and end-of-season sales. Food stores also reported an unseasonably strong month with a rise in sales volumes of 1.8% – their highest yearly increase since July 2021.
“As we enter the ‘golden quarter’ with shopping events such Halloween and Black Friday on the horizon, retailers will be hoping for a positive end to the year, with many racing to attract consumers earlier than ever. Last year we saw retailers begin their mid-season sales in October and a ‘Black November’ could be on the cards again, signalling an eagerness by retailers to clear stock well ahead of the Christmas rush and spread out the trading period, rather than relying on the final six-week sprint to the end of the year.
“Over the next few months, it will be essential for retailers to keep a close eye on sales volumes, stock levels and competitor behaviour. Promoting too early and selling out at a discount could prove detrimental, but waiting too long to activate promotions could leave them with excess stock. It’s a fine line to walk.”
