The latest retail sales reports give us a good insight into the impact of Covid-19 on the retail sector. Sales in the UK fell by more than 18% during April; the biggest decline on record.
Fuel sales fell by 52%, clothing and footwear sales fell by 50% and sales of household goods by 45%, but non-store sales, mainly on-line, increased by 18%. And in Scotland the situation is equally sombre. According to the latest SRC-KPMG survey retail sales fell by 40% over the year to April. Food sales fell by more than 2%, as households started to run down stockpiles gathered during March, but non-food sales collapsed by a staggering 71%, reflecting a full-month under lockdown conditions.
For retailers the key question now is whether shoppers will rush back once lockdown conditions ease, or whether some of our current habits have become entrenched. Non-food retailers in England can re-open from 15th June, and we will be watching to see how keen customers are to shop, despite the challenge of maintaining social distance. Meanwhile retailers will have to make changes based on the needs of customers and staff, while also trying to achieve profitability. This will require a good understanding of their new level of fixed costs and also the direct costs of their business.
Last week we also saw the latest UK Purchasing Managers’ reports. The preliminary reports for May show some signs of improvement, which is welcome news, but indicate that output is still falling in both the manufacturing and services sectors. We all hope manufacturing production can restart soon, but social distancing measures for staff could easily result in lower levels of output, productivity and profitability. In the service sector the problem is enhanced, particularly in customer facing sectors. The solution invariably implies fewer customers at any one time, which again impacts on both productivity and profitability.
Economics has never been more important. It is critical that business owners have a really good understanding of economic opportunities and challenges at the global, national and regional level. But businesses also need good insight into the economics of their own ventures, including supply chains, costing, pricing, competition and the many economic factors affecting their customers.
This is a fast-moving situation and the views, opinions, information and data contained in this newsletter may change as subsequent conditions vary. Although all information used in this publication has been compiled from sources believed to be reliable, it has not been independently verified. This newsletter is for information purposes only.
This Economic Update document has been produced for Dundee & Angus Chamber of Commerce by Dr Shona Dobbie, Angus Economics
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