Price wars and discounters hit overall retail sales

By Richard Siddle

Published: 12 August, 2014

Retailer price wars coupled with the ongoing impact of the hard discounters saw overall UK retail sales slip back for the first time in two years, according to the latest British Retail Consortium /KPMG figures.

Food sales have been hit Food sales have been hit over the last three monthsThe latest BRC/KPMG retail sales figures do not make good reading for high street grocers

The figures show that average like-for-like sales measured by price for the three months to July fell 0.3% against the same period last year. The last time the three-month moving average was negative was in June 2012.

Although overall sales were up 1.3% this compares to a 3.9% rise in July 2013. The 1.3% three-month average total sales growth is also below the twelve-month average of 2.3%.

This is despite continued warm weather across the country and the impact of the World Cup.

Food was particularly hardest hit over the last three months with sales down 1.4%, despite 0.4% average growth over the last 12 months. Total retail sales were buoyed by non-food sales which saw growth of 3.4% over the three months to July 2014, in line with its twelve-month average of 3.8%.

The growth in online continues unabated, particularly for non-food sales which were up 14.9% in July against a year earlier.

David McCorquodale, head of retail at KPMG, believes the continued impact of discounting on the grocery retail sector may be good news for consumers, but is a trend that is here for the long haul: ""The tale of two sectors continues with polarisation between food and non-food. While non-food retailers had a stellar month, surpassing even last year's record sales performance, the grocers saw sales tumble in value as their competitive pricing continued.

"The grocers' figures continue to make for gloomy reading for the sector. The impact of their prolonged discounting campaigns may be good news for consumers, but must be being felt deeply by the retailers given like for like sales have fallen in value every month for the last 12 months, save for April when Easter helped sales. The headache for the grocer investor is the tonic for the consumer: it's likely these price wars are here to stay for the foreseeable future."

Helen Dickinson, director general, British Retail Consortium, added: "Food experienced its deepest three-month average decline since at least December 2008, explained partly by the continuing keen price competition between supermarkets, which consumers are taking full advantage of, and record low food inflation.

"Non-food online sales continued to show strong growth, the third highest this year, driven notably by furniture, kitchen appliances, gaming and toys."

Joanne Denney-Finch,. chief executive of the IGD, said of the grocery performance: "Warm weather is usually good for food and drink sales but since last July was hotter than this, year-on-year food retail sales were again disappointing.

"However, the stream of positive economic news is having some effect on shopper sentiment. A fifth (20%) of them are planning to prioritise quality over saving money in their grocery shopping compared with 16% who said this a year ago, according to our latest ShopperVista research. With low inflation and a gradual return to wage growth, people are slowly becoming better placed to act on this rising focus on quality."

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