Cost of living: Stark warning as Scottish shoppers 'batten down the hatches' and focus on essentials

Retail industry leaders have warned of clear signs that consumers are “battening down the hatches” after Scottish sales barely scraped into positive territory last month.

Releasing its latest sales monitor, the Scottish Retail Consortium (SRC) said total sales edged up just 0.8 per cent last month, compared with September last year and when adjusted for the effects of spiralling inflation.

Ewan MacDonald-Russell, deputy head of the SRC, said: “Scottish sales showed a sliver of growth in September, with a real terms rise of 0.8 per cent. Nonetheless, there are clear signs customers are battening down the hatches ahead of the expected winter costs crunch. Food sales fell in real terms as customers cut back on the volume of goods. With food inflation now outpacing sales, even grocery retailers are feeling the pressure as customers focus on essential items.”

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The latest figures showed that total non-food sales rose by 3.9 per cent last month compared with September 2021, when they had increased by 2.1 per cent. This was above the three-month average increase of 3.5 per cent and below the 12-month average of 27.1 per cent. Those figures are not adjusted for inflation.

MacDonald-Russell added: “Non-food sales were dominated by consumers looking for ways to reduce their energy bills. Duvets, blankets, and air fryers all did well as customers look to cut costs and prepare for winter. These are not propitious signs for retailers as they enter the golden trading quarter.

“With customers focusing on essentials, it will be a real challenge to encourage shoppers to splash out on Christmas gifts. Government needs to keep a watchful eye on this and be prepared to take action in upcoming fiscal announcements to support retailers facing intense cost challenges.”

Adjusted for the estimated effect of online sales, total non-food sales increased by 3 per cent in September versus the same month last year, when they had decreased by 1.7 per cent. This was above the three-month average growth of 1.8 per cent.

Paul Martin, partner and UK head of retail at KPMG, which helps to produce the monthly sales monitor, said: “Despite Scottish retail sales growing in September, high levels of inflation wiped out signs of real terms growth, and unfortunately, tougher times are ahead. Consumers were more cautious last month, avoiding large ticket items as many households prepared for higher energy costs through the winter, evidenced by a spike in warm clothes purchases during September.

The outlook for the retail sector heading into the crucial festive trading period is looking stormy. Picture: David Mirzoeff/PA Wire

“With interest rates, inflation, labour, energy and cost of goods continuing to climb, retailers are heading into one of the most challenging Christmas shopping periods they have had to deal with in years. Consumer confidence remains low, and retailers are having to tread a very fine line between protecting their own margins and further denting confidence by passing on price rises.”

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He added: “As consumers focus on getting value for money through switching to own-brand items and seeking out discounts, getting pricing and promotional activity right could be the difference between a successful or dismal Christmas for retailers this year.”