Retailers are facing one of their toughest festive seasons ever as inflation and living costs curb growth, according to new research.
The industry had been showing signs of recovery, after total sales in Scotland increased by 6.3% compared with October 2021, when 2% growth was recorded.
The figures have been adjusted due to inflationary rises; the year-on year change was 0.3% according to the Scottish Retail Consortium (SRC) and KPMG data.
A report showed that a portion of the sales growth is a reflection of rising inflation levels which are at historically high levels, rather than increased volumes.
Due to the inflationary pressure, the 6.3% increase does not show the full picture of sales volumes.
Paul Martin, partner and head of retail at KPMG, said: “The bottom line is that consumers are buying fewer products per shop - sales across almost every category both online and in store fell year-on-year as consumers adjust to shrinking household incomes.
“Retailers will be hedging their bets on upcoming events such as the World Cup and Black Friday to boost sales during the crucial golden quarter.
“Given the economic headwinds, it is unlikely that the usual festive boost will be enough to counteract the ongoing issues that retailers face with rising costs, squeezed margins and falling demand.
“Whilst Christmas is by no means cancelled, as consumers focus on one bright spot amongst the economic clouds, retailers are facing possibly their toughest festive season in a decade as shoppers look to trade down, search out bargains and purchase less to meet the economic challenges ahead.”
Non-food sales saw an increase of 2.4% in October, compared with the previous year’s increase of 4.8%.
Figures were again above the three-month average increase of 2.4%, but below the 12-month average of 26.9%, highlighting that people are prioritising where their money is spent.
When adjusted for the estimated effect of online sales, the non-food sales total decreased by 0.5% in October, compared with a 0.4% increase in 2021.
This shows that food volumes continue to fall with customers have to pay more for fewer items.
Ewan MacDonald-Russell, deputy head at the SRC, added: “Despite being the first month of the golden trading quarter, retailers will be disappointed not to have seen any surge in sales either for Halloween or early Christmas-related trading.
“Food volumes continue to fall and that is having a knock-on effect on more discretionary retail spending, with the few signs of life being purchases of energy saving items such as air fryers for cooking, heated clothing airers and blankets.
“Weak trading is a huge concern for retailers who have suffered two successive poor Christmases - with costs skyrocketing, the pressure is building on retailers to deliver a good performance.
“However, the Scottish and UK governments need to urgently assess the costs they are adding to businesses and see where they could lighten the burden.”
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