A round up of research shows price-cutting is all that is driving sales at the major retailers while shoppers seem to be getting used to the tough times and looking at quality and values again.
Data released last week by the Office for National Statistics (ONS) show that the total value of retail sales was up 3.5 per cent in January compared with the same month in 2011.
As this is in line with inflation recorded in January, any growth in volume is down to retailers cutting prices, the British Retail Consortium (BRC) has said.
BRC director general, Stephen Robertson, said: “These numbers are slightly better than we would have expected but make it clear that price-cutting by retailers is what is driving any growth in business. Discounting is biting into retailers’ margins with non-food businesses facing particularly tough times.
Meanwhile, footfall at the retailers is causing concern. Research carried out for BRC by Springboard found that total retail footfall from November 2011 to January 2012 was 1.8 per cent up on a year ago. But Robertson is wary of this uplift. He said: “The lift in shopper numbers for the quarter is almost entirely down to a strong Christmas. And December looks deceptively good because it’s being compared with the heavy snowfall, which affected the end of 2010 and kept many people at home then. At the start of 2012 footfall numbers dipped again, showing underlying caution hasn’t changed. Worries about personal finances and job security are putting people off shopping. Although inflation has started to ease, costs are still rising faster than wages. Any significant change in consumer sentiment is going to take time.
Although according to sector analyst IGD shoppers are starting to look on the bright side. In January, IGD’s ShopperVista survey of over 1,000 food and grocery shoppers found that although 47 per cent of shoppers still believe they will be worse off in the year ahead, this is down from 61 per cent a year ago. Four in ten now believe their personal economic situation will be “about the same” over the next twelve months, up from 29 per cent a year ago. And encouragingly, the lowest numbers of shoppers to date expect food prices to get much more expensive over the next 12 months - 21 per cent down from 35 per cent a year ago.
Joanne Denney-Finch, chief executive, IGD, said: “A growing number of shoppers seem to believe that the worst is behind them. They have adapted to the new economic reality and are aware that UK inflation may have peaked. Rising food, fuel and utility prices are the main factors that shoppers fear will make them worse off in the future, so good news in this area is helping improve shopper confidence….with more people becoming used to the way things are, they are focusing again on values, with 34 per cent saying that quality is extremely important when choosing where to shop for food and groceries - the highest level for more than a year.”
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