UK retail sales continued their upward trend in September, although at a slower pace than the previous month, according to the latest figures released by the Office for National Statistics (ONS) on Friday.
In terms of volume, retail sales saw a 0.3% increase in September, a marked slowdown from the 1.0% rise observed in August. Despite this moderation, the overall sales volumes have reached their highest levels since July 2022, indicating a sustained growth trajectory.
The growth in September was largely driven by non-food retailers, particularly those in the computer and telecommunications sector, which experienced a significant boost. Sales volumes in this category rose by 2.5%, with the “other non-food” stores segment seeing an even more impressive 5.5% jump. This surge was attributed to increased consumer spending on electronics and other non-essential items.
In contrast, food stores faced a notable decline, with sales dropping by 2.4%, the largest fall for supermarkets this year. This decline highlights the ongoing challenges in the retail sector, where supermarkets are struggling to maintain sales volumes.
The quarterly performance, however, paints a more optimistic picture. Retail sales volumes increased by 1.9% in the third quarter (July to September) compared to the second quarter, marking the joint-largest rise since July 2021. On a year-on-year basis, sales volumes grew by 2.6%, the largest annual increase since March 2022.
Online sales continued to be a strong performer, with a 1.3% rise in online spending in September and a 6.7% increase compared to the same month last year. The proportion of sales made online slightly increased from 27.5% in August to 27.7% in September, underscoring the growing dominance of e-commerce in the retail landscape.
As retailers approach the critical “golden quarter,” which includes key shopping events like Halloween and Black Friday, they are preparing to use discounting strategies to stimulate consumer spending and manage stock levels more effectively. Silvia Rindone, EY UK&I Retail Lead, emphasized the importance of this period, noting that retailers who can target specific customer groups will likely see more success. However, she also cautioned about the potential volatility in sales leading up to Christmas and the delicate balance between timely promotions and avoiding stock issues.
Nathan Peacey, Head of Retail at Foot Anstey, highlighted the ongoing pressures on the retail sector, where tight margins remain a constant challenge. He also reiterated the need for a rebalancing of business rates in the upcoming Autumn Budget, given the disproportionate burden on bricks-and-mortar stores compared to their online counterparts.
In summary, while the monthly growth in September was modest, the overall retail sales performance suggests a cautious optimism in consumer confidence. Retailers are navigating a complex landscape, balancing inventory management, discounting strategies, and the evolving competitive environment to maximize their profits in the final quarter of 2024.
