Retail sales volumes are estimated to have increased by 0.5% in January 2023, following a fall of 1.2% in December 2022 (revised from a fall of 1.0%); sales volumes were 1.4% below their pre-coronavirus (COVID-19) February 2020 levels.
Sales volumes fell by 0.9% in the three months to January 2023 when compared with the previous three months; compared with the same period a year earlier, retail sales volumes fell by 5.7% in the three months to January 2023.
Non-store retailing (predominantly online retailers) sales volumes rose by 2.0% in January 2023, with some feedback that January sales promotions supported the rise.
Automotive fuel sales volumes rose by 1.7% in January 2023, following a rise of 0.3% in December 2022 as fuel prices continued to fall.
Non-food stores sales volumes rose by 0.6% over the month, following a fall of 2.5% in December 2022 with feedback from retailers that growth was supported by sales promotions; despite this pickup, sales volumes were 2.9% below their pre-coronavirus February 2020 levels.
Food store sales volumes fell by 0.5% in January 2023 following a fall of 0.7% in December 2022; we continue to receive feedback that customers were buying less because of increased cost of living and food prices.
The proportion of retail sales online fell to 25.0% in January 2023 from 25.7% in December 2022; despite this fall, it remains significantly above pre-coronavirus levels (19.8% in February 2020).
Carly Donovan, associate partner at McKinsey & Company comments: “Retail sales volumes grew in January by 0.5%, but sales value grew 0.6%. Meaning customers are buying less, and spending more. High inflation in essential categories (like food and household goods), is capturing a larger part of the share of wallet leaving consumers with less to spend in more discretionary categories.
“Although this small growth in retail sales volumes is slightly better than anticipated. Unsurprisingly, 2023 is proving to be a more challenging environment with sales remaining at 1.4% below their pre-COVID-19 levels.
“This picture looks better online, where sales volumes rose by 2% in January 2023. The proportion of online retail sales is now at 25%, significantly above pre-COVID-19 levels (19.8% in 2022) suggesting that online shopping behaviours established in the pandemic are here to stay.
“In categories like textiles, clothing and footwear – online sales as a proportion of total sales have grown both relative to the previous month, and the previous year – suggesting online sales offers have been more successful in engaging consumers here.”
Lynda Petherick, head of retail at Accenture in the UK & Ireland, said: “After December’s unexpected drop in retail sales, retailers will be relieved to see trading move in the right direction.
“The road ahead for businesses continues to be a rocky one, though. Data out this week shows prices are continuing to climb, albeit at a slower rate, so consumers are still likely to be mindful of cutting back. Prices are also rising at differing rates depending on which part of the retail sector you look at, so those not keeping track with inflation will be facing further financial pressures.
“With spring on the horizon, many businesses will already be looking forward to warmer months, in the hope that consumer sentiment improves. In the meantime, they must continue to manage their costs where they can in order to maintain positive sales growth, while supporting customers and colleagues in this challenging economic environment.”
Oliver Vernon-Harcourt, head of retail at Deloitte, said: “January’s retail sales rose unexpectedly despite consumers facing a longer wait for payday and ongoing high food prices.
“The retail industry is entering a transitionary period as inflation eases and consumer confidence shows early signs of improvement.
“However, times continue to be tough for the retail sector. Leaders’ focus will remain on sales growth while managing higher costs and changing demand. To do this, retailers will need to ensure they offer the right balance of quality and value for consumers to spend their hard-earned money.
“For those that continue to invest in both their people and customer engagement, better times are ahead.”
Sachin Jangam, partner for retail at Infosys Consulting, said: “Despite the common narrative, this January retail sales across the UK were stronger than expected – rising by 0.5%. However, we still saw consumers cut back on grocery shopping as food inflation continues.
“To remain competitive as food sales drop, supermarkets must optimise costs where possible – this means being more agile when it comes to changing the mix in stores. They should, for example, use AI to help align consumer demand with data-driven store assortment to support availability and maximise profit per square foot. This alone, however, can’t keep stores afloat, they should also be focusing on their price match schemes to stay competitive. Supermarket discounters Aldi and Lidl are great examples of how these schemes can help stores soar to success by appealing to the needs of their consumers.”
