Shops face coronavirus challenge after falling demand and rising costs

March 18, 2020 12:01:00 AM

Retailers were facing “serious headwinds” of dropping demand and rising costs even before the coronavirus pandemic, according to experts.

The Scottish Retail Consortium (SRC) and KPMG’s retail sales monitor showed total sales in Scotland decreased by 0.8% last month compared with February 2019.

Food sales increased 2.9% last month with health products and some indoor categories such as electrical items including white goods and TVs also faring well.

Fashion and footwear wilted badly and recorded its weakest performance since last May as total non-food sales decreased by 3.8% compared to February 2019.

David Lonsdale, director of the consortium, suggested storms from earlier in the year played a part in the figures but also remarked on how the Covid-19 outbreak will now play on retailers’ minds.

He said: “These figures underline how tough trading conditions were in Scotland’s retail destinations in February, even before the coronavirus onslaught of the past fortnight, with retail sales essentially flat once shop price inflation is considered.

“There was little respite for shoppers or shopkeepers, who were buffeted by a maelstrom of multiple storms and dismal weather which kept customers at bay, shrinking footfall in the process.

“It comes against the backdrop of an industry going through an intense period of structural change.”

On Monday, the Scottish Government announced a £320 million support package to limit the impact of the virus coronavirus on businesses north of the border.

Mr Lonsdale added: “Even before the onset of coronavirus, retailers were facing serious headwinds of dropping demand and rising costs.

“The devolved Government has in recent days responded to the urgent situation with both financial and practical assistance.

“Ministers have flexed the rules around out-of-hours delivery times to shops and depots, allowed firms to defer business rates payments in order to aid cash flow, and scrapped next month’s across-the-board business rates increase.

“These steps will help bring a little confidence and cash flow to pressured businesses, albeit more may well be required as the situation develops.”

Adjusted for the estimated effect of online sales, total non-food sales decreased by 2.4%.

Paul Martin, UK head of retail at KPMG, said the industry will need to “evolve and survive” amid the problems caused by the coronavirus.

He said: “The start of the year offered Scotland’s retailers a brief glimmer of hope, with a modest increase in sales, but the latest figures from February simply hammer home the reality facing the sector.

“With total sales down almost 1% compared to the same period last year, the industry is being forced to accept a ‘new norm’ driven by shifting consumer behaviour and global instability.

“While Brexit was the dominant theme in 2019, retailers are now preparing for a potentially far greater challenge from coronavirus, with demand likely seriously impacted for at least the next few weeks.

“Despite the overwhelming scale of the problems ahead, the retail sector in Scotland is working tirelessly to evolve and survive.

“Now is the time for political leaders to work closely with the industry to prevent potentially irreversible damage from this global crisis.”

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