Consumers have started the year with a tight rein on spending
Paul Martin, UK Head of Retail | KPMG
“With inflation running at around 10%, sales growth for January nearly halved in comparison to December to just over 4% - sending a clear signal that consumers have started the year with a tight rein on spending as they face another period of rising costs.
Sales of clothing continued to prop up the high street, with men’s clothes and shoes the strongest category in January, whilst purchases of energy efficient appliances remained a top purchase for consumers. The decline in sales taking place online continued this month, but is starting to level out and far from the 24% drop in sales that online retailers witnessed a year ago in January.
As we head into a difficult time for consumers, the short-term outlook for the retail sector remains challenging. With the latest interest rate rise and utility price increases heading our way, shrinking household incomes means we will continue to see a shift in what consumers buy and where they buy from. Retailers face a tightrope as their costs rise and margins are squeezed, 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. Those retailers that have emerged from the pandemic in good shape will benefit from the current situation through market-share growth and consolidation opportunities, but all retailers are facing a tough few months of falling consumer spending in real terms.”
