Cost-of-living crisis: Scottish sales slide as consumers slash discretionary spending

Scottish consumers are cutting back on discretionary spending and switching to cheaper brands as it emerged that sales fell back last month.

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales north of the Border increased by 1.6 per cent last month, compared with May 2021. However, that headline figure was largely a reflection of rising prices, industry leaders noted, and in real terms there was a year-on-year decrease of 1.1 per cent.

The data comes amid soaring inflation with prices rising at their fastest rate for 40 years as higher fuel costs and food bills push up the cost of living.

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Ewan MacDonald-Russell, head of policy and external affairs at the SRC, said: “The bleak economic news translated into meagre Scottish retail sales as customers cut back on spending in May. In real terms, sales fell by 1.1 per cent compared to 2021 with consumers responding to the cost-of-living crisis by reigning in their spending or trading down.

Retailers are facing the difficult truth that their customers are becoming more price conscious in response to high inflation. Those customers are responding by reducing their discretionary spending, both by buying fewer items but also trading down from premium to value ranges.

Government at both Holyrood and Westminster need to keep a close eye over the coming months and stand ready to take action if the situation doesn’t resolve itself soon”, he added.

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Food sales fell by 2.5 per cent in real terms last month as store takings were offset by higher input costs, exacerbated by the conflict in Ukraine.

Non-food sales were similarly weak, the SRC noted, with white goods and homeware products especially poor. Fashion was bolstered by sales of formalwear as people started to attend weddings and similar events following the lifting of coronavirus restrictions.

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The high street faces a stormy summer as the squeeze on consumer spending intensifies. Picture: David Mirzoeff/PA Wire

Adjusted for the estimated effect of online sales, total non-food sales fell by 2.6 per cent in May versus the same month last year. This is below the three-month average growth of 23.9 per cent and the 12-month average of 25.4 per cent.

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Paul Martin, partner and UK head of retail at KPMG, which helps to produce the monthly sales monitor, said: “The sun didn’t shine for long during May, and clouds remain for Scottish retailers after a less than convincing May saw sales growth stall for the second month running.

“The rising cost of living is still top of the agenda for retailers, with consumer confidence a key factor to watch out for. Retailers will be hoping that warmer weather and a summer feel-good factor builds confidence among some shoppers - as presently overall confidence levels are lower than sales may suggest.

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“It also remains to be seen what effect the Chancellor’s recent announcement to provide a universal discount on energy bills will do to confidence levels, as consumers continue to make difficult choices about how to spend their money.”

He added: “Cost and efficiency are still top of agenda for most operators, and crucially, understanding how they can protect their margins whilst remaining price competitive for consumers.”

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Scottish retail recovery threatened by cost-of-living crisis as sales dip