Cost of living: Scotland's shopkeepers facing 'bitter winter' as inflation wipes out meagre sales rise

Scottish retail sales have flatlined amid soaring inflation as industry leaders warned of a “bitter winter” for the nation’s shopkeepers.

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales north of the Border increased by 4.4 per cent last month compared with July 2021. However, adjusted for inflation, the year-on-year change was zero.

Ewan MacDonald Russell, deputy head of the SRC, said: “In real terms Scottish retail sales flatlined as a modest rise in the value of sales was wiped out by the impact of record rising inflation.

“Food sales rose by 5.3 per cent as shoppers increased their grocery budgets – but that hides the reality that customers’ pounds are buying fewer products. Retailers did see shoppers changing their food shopping to purchase more outdoor food to take advantage of the sunshine – but that was instead of other purchases.”

Total non-food sales rose by 3.7 per cent in July compared with the same month last year, when they had increased by 12.1 per cent following the relaxation of Covid restrictions. This was below the three-month average increase of 3.8 per cent.

Adjusted for the estimated effect of online sales, total non-food sales were up by 1.9 per cent year on year in July.

MacDonald Russell added: “All the evidence suggests that the cost-of-living crisis is already hitting the high street. The more shoppers cut back on discretionary spending the more difficult things will become for already beleaguered retailers.

“Those businesses are also dealing with huge inflationary pressures which are exacerbating the difficult trading environment. Unless the Scottish and UK governments take swift action, it may be a bitter winter for Scotland’s shopkeepers.”

Shoppers out and about in the centre of Glasgow. Picture: Jane Barlow/PA

Paul Martin, partner and UK head of retail at KPMG, which helps to produce the monthly sales monitor, said: “Scottish consumers continued to spend at the tills in July, despite consumer confidence polls being at an all-time low. Scots were determined to enjoy delayed holidays and a first unrestricted summer with good weather.

“While this growth is positive, it’s likely to change as consumers arrive back from summer breaks to holiday credit card bills, another energy price hike and rising interest rates. With these stronger cost-of-living headwinds on the horizon, consumers will have to prioritise essentials, and discretionary product spending will come under pressure.”

He added: ““As margins continue to be challenged, and costs continue to rise, a significant drop in demand during the autumn will negatively impact the health of the retail sector.

“Successful retailers will need to carefully anticipate customer buying patterns in the months ahead, and make sure they balance their offering with the right products, prices and promotions.”

Last month’s sales monitor brought “some welcome rays of sunshine” for Scottish retailers as consumers snapped up holiday essentials.

Total sales rose by 4.4 per cent in June, compared with a year earlier - the same percentage rise outlined in the latest report. This was below both the three-month and 12-month averages, while adjusted for inflation, the year-on-year increase was just 1.2 per cent.