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According to the BDO High Street Sales Tracker (HSST), March was a difficult month for UK retail as a result of rising prices and a decline in consumer spending. With in-store sales notably down 0.4% year on year, the fashion industry saw its worst result in more than two years despite a recent uptick in physical retail, and that remains the case.
Retailers are under pressure on two fronts, according to Sophie Michael, head of retail at BDO, as consumer spending is declining and retailers are being forced to raise the prices of their goods. Lower sales volumes result from all of this.
MARCH Tighten belts
Looking more closely at the numbers, we see that overall retail like-for-like (LFL) sales increased by 4.1% from March 2022 to 2024, whilst internet sales increased by just 2.8%, hardly making up for their 10.8% decline from the previous year. However, from a solid basis in March 2022, the total number of LFLs sold in-store increased by 6.6% in the month.
Since sales were below the rate of inflation in March, the performance decreased.
Inflation is currently around 10% overall, and for food, it is a startling 18%, according to Sophie Michael. We can see from the data that this is reducing consumers’ discretionary spending, which is terrible news for the fashion, leisure, and homewares industries
Inflation Deflation in a particular industry.
Total LFLs were rising year over year as March got off to a great start. However, they slowed down in the second week because of the terrible weather that affected parts of the UK. Mother’s Day and the third week of the month showed a little improvement. While Mother’s Day was a part of that week in 2022, which may have contributed to the decline in LFL sales in 2024, it’s still a depressing note for shops to conclude the month on.
Regarding the fashion industry’s underperformance, overall LFLs increased by just 0.7% in March, and as was already established, in-store sales had a particularly dismal 0.4% decline.
With a total LFL growth of 9.7%, the lifestyle category, according to BDO, had the highest performance of any industry however even that was still below the rate of inflation. For Mother’s Day, consumers may have purchased presents from the health and beauty categories, which might have contributed to part of this gain.
Sophie Michael spoked that the impact of inflation is incredibly difficult for merchants, especially in categories where discretionary spending is involved. Due to rising prices for necessities, consumers have less money to indulge themselves. This results in a smaller portion of their budget going into discretionary expenditure categories like fashion. Inflation in these sectors is currently growing quickly, especially in the fashion industry where prices increased by 8% in the year to February, up from 6.2% in January.
The bigger picture paints a dismal image. Consumer confidence is still persistently low, many homeowners will soon switch from fixed-rate mortgages to substantially higher interest rates, and the inflation rate for necessities isn’t going down.
Given this situation, shops will need to offer extremely alluring products and top-notch customer service, both in-person and online, to get customers to part with their increasingly thin wallets while maintaining their operational expenses.
