The UK annual inflation rate hit 9.1% in May 2022. Consumers reacted by making spending cuts as the prices of essentials such as energy, food, and petrol surged.
According to the BRC, retail sales was 1% lower in June 2022 than the previous year despite the demand created by the Queen’s platinum jubilee celebrations. Barclaycard’s survey reports a 5% year-on-year drop in household goods spending as 91% of consumers show concerns about inflation.
The UK inflation is at a 40-year high without any signs of recovery. Therefore, 95% of UK retail chairs forecast a further drop in shopper spending over the next year.
What are retailers doing to help consumers through this difficult time?
Asda’s new initiative allows children across Scotland, England and Wales access to hot or cold meals for just £1, 7 days a week, during the school summer holidays.
“We know that families can find the summer holidays tough, and our customers are telling us that this year more than ever, they’re concerned about holiday hunger,” Asda said.
Ikea’s children’s meal, which includes hot meal, jelly, a soft drink, and a piece of fruit, will be reduced to 95p from 12th July to 3rd September.
John Lewis& Waitrose:
Waitrose is accepting Free School Meal vouchers during the summer, donating surplus food through FareShare, and the company has also pledged to donate £1 million to help fund healthy food and activities for children.
While other retailers are providing immediate relief, Amazon is investing £1 billion in opening new warehouses in the UK, creating 4,000 new jobs this year.
In spite of inflation being higher than during the depths of the pandemic, some retail sectors have seen growth in sales. Demand for footwear, fashion, and beauty products are higher than pre pandemic levels as consumer continue to revenge spend, attend weddings, go on holidays, and enjoy a social summer. Consumers are socialising more than they did before the pandemic leading to a spending surge of 1% ahead of pre-pandemic levels, and 165% higher than last year.
Another reason for higher sales recorded by some retailers is inflation itself. Everything is pricier. Therefore, despite the number of items being sold falling by 8%, the price being paid for items purchased was up by 9%.
Consumers are also becoming more environmentally conscious and choosing higher quality brands with a focus on sustainability. They’re willing to pay the green price leading to higher spending.
For these reasons, many retail companies have shown positive sales this year:
- · Dr Martens’ ecommerce sales rose by 11% in the first quarter, which is up 92% compared to 2020.
- · Crew Clothing’s turnover reached £82.7 million, up 22% from 2019.
- · H&M’s net sales grew by 23% to Skr49.16 billion
In summary, it’s not quite doomsday for retail. Although many are expecting the recession to hit UK harder than any other European countries, retailers who show compassion and flexibility clearly have nothing to worry about.