In recent months, UK supermarket sales have experienced a noticeable decline, reaching the lowest levels since January.
- Total Till sales dropped to a growth rate of 7.2% in the four weeks leading up to August 12, attributed to easing inflation and erratic summer weather.
- Retailers have ramped up promotional efforts, increasing expenditure on promotions by 23% to boost consumer spending amid economic challenges.
- Despite the general slowdown, Tesco, M&S, Aldi, and Lidl have managed to increase their market shares.
- Economic pressures, including rising mortgage and rental expenses, contribute to the ongoing challenge of encouraging consumer spending.
In a significant development for the UK retail sector, supermarket sales growth has decelerated to its lowest point since January, posting a 7.2% increase in Total Till sales during the four weeks leading up to August 12. This slowdown can be attributed to a combination of easing inflation and unseasonably disrupted weather patterns, which have a direct impact on consumer shopping habits. This period has seen a decrease in the frequency of store visits by shoppers, reflecting the broader economic climate.
Retailers have responded by aggressively increasing their promotional spending by 23%, slightly up from the previous month’s 0.5% increase, across all Fast-Moving Consumer Goods (FMCG). This strategy is part of a broader effort to stimulate consumer spending and mitigate the cost-of-living crisis pressures faced by many households. Targeted price cuts are being employed by numerous supermarkets, alongside loyalty cards designed to offer customers further savings.
Prominent players such as Tesco have successfully navigated these challenges, recording a 9.7% rise in sales and an expanded market share over the past twelve weeks. Similarly, M&S, along with discounters like Aldi and Lidl, have also increased their market share, a testament to their robust market strategies. An interesting trend has emerged with 62% of consumers opting for discounters, attracting over 780,000 new shoppers compared to the same period last year. This shift underscores the growing consumer preference for cost-effective shopping solutions.
Conversely, Morrisons and Co-op have reported the weakest growth, with increases of only 1.7% and 2% respectively. According to Mike Watkins, the head of retailer and business insight at NIQ UK, the decline in supermarket sales volumes in recent weeks is likely influenced by traditional summer factors, such as holidays, alongside unpredictable weather conditions. The larger challenge remains in driving FMCG volume growth amid an environment of easing inflation.
Mr. Watkins further highlights the compounded economic pressures faced by households, including increased mortgage and rental costs. This environment complicates the ability of retailers and manufacturers to achieve volume growth, despite slowing inflation. Watkins emphasizes the need for persistent industry efforts to encourage consumer spending as a critical challenge that extends beyond the grocery sector.
The combination of easing inflation and economic pressures continues to pose significant challenges to the UK supermarket sector.
