Despite soaring inflation and higher borrowing costs, this marked the second consecutive month of growth, following a rise of 0.5% in April. The ONS attributed the positive May retail sales results to factors such as bank holidays and favourable weather conditions.
Specifically,
- Non-store retailing sales volumes rose by 2.7% in May 2023 because of strong sales by online retailers selling outdoor-related goods and summer clothing; this was boosted by the warm weather in the second half of the month.
- Retail sales volumes are estimated to have risen by 0.3% in May 2023, following a rise of 0.5% in April 2023.
Commenting on this development, Silvia Rindone, EY UK&I retail lead said: “The increasing divergence between retail sales values and sales volumes continued in May as price increases impacted the amount of goods UK consumers took home.
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By GlobalData“There was some positive news for online retail sales though, as the warmer weather saw non-store retailing sales volumes increase by 2.7% in May. with consumers turning to online channels to update their summer wardrobe and purchase outdoor-related goods.”
Despite this positive development, retail sales experienced a 2.1% year-on-year decline in May, showing a slight improvement from the downwardly-revised fall of 3.4% in April.
Charlie Huggins, manager of the quality shares portfolio at Wealth Club also believed that better weather helped the increase in online sales of both outdoor goods and summer clothing. Although the UK consumers continue to defy the “doom mongers” he questions how much longer this can persist.
“Mortgage rates have increased significantly in recent weeks and inflation is at risk of becoming entrenched. This doesn’t bode particularly well for consumer confidence in the back half of the year. At that point, retailers may really start to feel the pinch.”
Inflationary pressures and lingering economic uncertainty are still present in the UK but Nikki Baird, VP of strategy at Aptos highlighted that given the sustained levels of consumer spending retailers have a chance to continue to capture that relative optimism as summer commences.
“To keep the momentum high, revitalised loyalty schemes and cross-channel strategies focussed on experiences and fostering connections will be the name of the game.”
According to Kelly Askew, Accenture’s retail strategy & consulting lead in the UK and Ireland consumers will still be concerned by the high cost of living compounded by another hike in interest rates recently.
“Brands should prioritise offering their customers the best possible value and affordability where they can, whilst focusing on the in-store and online customer experience, in an environment where competition for customers is fierce.”
It is worth noting that the proportion of retail sales conducted online remains above pre-COVID-19 pandemic levels, reaching 19.7% in February 2020. This reflects the continued shift towards digital channels and the lasting impact of the pandemic on consumer behaviour.
When examining specific retail sectors, total non-food store sales volumes, including department stores, clothing stores, household stores, and other non-food stores, they fell by 0.2% over the month. While clothing store sales volumes declined by 0.4%, department store sales volumes saw a modest increase of 0.6%.
The unexpected rise in UK retail sales volumes in May serves as a reminder that amidst economic headwinds, the industry can demonstrate resilience and adaptability.
Rindone added: “As shoppers continue to make more considered decisions on where they spend their money, retailers need to work hard to better understand the factors influencing buying behaviour by re-evaluating ranges and pricing strategies. While a challenging process, those early adopters are now seeing an increase in market share – it’s now time for everyone else to be doing the same if they want to see the same returns.”
