Retail sales volumes (quantity bought) were estimated to be flat (0.0%) in February 2024, following an increase of 3.6% in January 2024 (revised from an increase of 3.4%), according to the latest data from the Office for National Statistics.
Sales volumes in clothing and department stores grew because of new collections but falls in food stores and fuel retailers offset this growth. Meanwhile online sales increased, particularly for clothing retailers, as wet weather affected footfall.
More broadly, sales volumes fell by 0.4% in the three months to February 2024 when compared with the previous three months, and by 1.0% when compared with the three months to February 202
Matt Jeffers, retail strategy and consulting managing director for Accenture in the UK & Ireland, said: “Holding sales will be a relief to retailers who will have been concerned the wet weather in February would more significantly dampen trading. Coupled with the news that consumer price inflation was lower than forecasted, consumer sentiment may finally be showing signs of recovery as they feel like they have more disposable income to spare. With clothing and department stores seeing particularly strong demand, vendors will hope that fruitful sales will continue as we enter the warmer months.
“Ahead of an important summer, retailers must align their strategies with consumers’ priorities. Value and convenience will remain the key for households across the UK as the recovery will take time. Offering quality products at the right price point, combined with a seamless shopping experience across different channels and formats, will be the recipe for success.”
Silvia Rindone, EY UK&I retail lead, said” “Much like the weather, UK retail sales in February were dampened by falling consumer demand which resulted in flat retail sales volumes, after an increase of 3.6% in January.
“Valentine’s Day did little to lift discretionary spending, with gifting products, such as jewellery, which typically see an increase in sales volumes this time of year, failing to see significant growth. Clothing sales volumes saw a level of growth, with the launch of new spring collections and promotions contributing and sales volumes in department stores and other non-food stores saw growth of 1.6% and 0.4%. However, after a strong month in January, food sales fell by 0.3% in February, with poor weather cited as the reason for a drop in store footfall.
“While the weather negatively impacted physical store sales, online sales saw the largest rise in sales since July 2023 as the amount spent online rose by 2.1% in February.
“Despite calls from retailers and industry bodies, the Chancellor’s Spring Budget provided little support to the retail sector. With many retailers facing sustained cost pressures and a challenging labour market, prayers about the re-introduction of VAT-free shopping to bolster the UK’s attractiveness to high-spending tourists and a business rates discount, were left unanswered.
“While February was a challenging month, there is an air of positivity as the season changes. With Easter being relatively early this year, retailers will be hopeful that spring has a positive impact on consumer confidence as people spend time with their families and prepare for the summer months.
“Many retailers have been using heavy discounting to stimulate demand over the last few years, however a shift in focus towards profitable growth, not cost, is needed. Retailers will need to find ways to wean off long standing promotional programmes to balance out retail sales and volumes.”
Oliver Vernon-Harcourt, head of retail at Deloitte, said: “Wet and windy weather, paired with ongoing cost pressures, created a perfect storm for the retail sector in February as it failed to register growth. Fewer consumers headed to the high street to spend. However, the non-food sector showed some green shoots of growth as consumers purchased new collections, particularly online.
“Brighter days are ahead, with the short-lived and shallow recession seemingly behind us, and inflation reaching its lowest rate for two years, real household incomes are expected to gradually recover in the coming months. The high street can be hopeful that fewer inflated prices will support greater spending and footfall, while warmer weather encourages consumers to do more outside the home.
“In the short term, retailers should focus on doing the basics well – great customer service, brilliant products, good availability and a continual focus on cost and working capital control. This will be key to be in the best shape for the anticipated consumer recovery later in 2024.”
Samantha Phillips, partner at McKinsey & Company comments: “Retail sales continue to yo-yo. A wet February dampened footfall and there are signs that consumers continue to err on the side of caution – either trading down or postponing non-essential purchases altogether to cope with pressures on household budgets.
“Surprisingly, last month’s growth was primarily offset by food sales volumes falling 0.3% in February 2024, despite inflation falling to a two-year low, driven by reduced footfall.
“Non-food, especially department stores and clothing, saw a more positive monthly performance of 0.7% growth as new collections launched and old ones continued to be heavily promoted. However, household goods saw the largest decline of 1% as consumers were affected by wet weather and continued conservative spending.
“Online retailers saw a partial bounce back from a difficult January, bolstered by the rain.
“Retailers will now be hoping that Easter and Ramadan tempt shoppers to the tills in the final few weeks of Q1 trading. With expectations that spending on food will form a more significant part of this ‘occasion spend’ like with Christmas. Meeting consumers’ perceptions of value and creating reasons to buy will be key during this period. Many retailers will be examining their promotional strategies and pulling levers to offer consumers the goods they want, at prices they are willing to pay.”
Dan Edelman, vice president & UK general manager, Merchant Services at American Express, said: “American Express research last year found that on average it only takes three negative experiences with a brand for a customer to seek out their competitors.
“With today’s ONS figures showing that sales remain flat, creating positive customer experiences will be crucial to driving footfall and capturing spend as we move into the spring and summer periods.
“For the majority this will be about evolution not revolution. Our research found that helpful staff, easy-to-use reward schemes, and a seamless checkout process are as important as sales and discounts when it comes to building customer loyalty.”
