Both the UK and Scottish Governments will have to be ready to take action over rising prices and “meagre” sales figures, retail experts have warned.
Ewan MacDonald-Russell from the Scottish Retail Consortium (SRC) said Westminster and Holyrood will have to keep a “close eye” on the situation facing retailers in the the coming months.
It comes as the organisation reported “meagre” sales growth in May.
Total sales in Scotland increased by 1.6% in May compared to the same period last year. The figure is below the three and 12-month average increases of 18.9% and 18.5% respectively, the SRC said.
Due to record-high inflation, figures have been adjusted that show a 1.1% decrease as the shop price index and consumer price index level continues to increase.
Food sales increased by 1.8% compared to May 2021 when they had decreased by 1.1%. Last month was above the three month average of 0.0%.
Non-food sales increased by 1.5% compared to last year but is below the three month average increase of 34.8% and the 12-month average of 33.9%.
The SRC said that the figures are more reflective of rising prices than an increase in the amount of goods customers are purchasing.
Mr MacDonald-Russell said the figures show customers cut back on spending last month. He added: “In real terms sales fell by 1.1% compared to 2021, with consumers responding to the cost-of-living crisis by reigning in their spending or trading down.
“Food fell by 2.5% in real terms as feeble sales were significantly offset by higher input costs; exacerbated by the conflict in Ukraine.
“Non-food sales were similarly weak, with white goods and homeware especially poor, albeit fashion was bolstered by sales of formalwear as people started to attend weddings and similar events after a three-year hiatus.”
Customers are reducing spending on non-necessities by buying fewer items and switching from premium to value ranges.
Paul Martin, UK Head of Retail at KPMG, said: “The sun didn’t shine for long during May, and clouds remain for Scottish retailers after a less than convincing May saw sales growth stall for the second month running.
“The rising cost of living is still top of the agenda for retailers, with consumer confidence a key factor to watch out for. Retailers will be hoping that warmer weather and a summer feel-good factor builds confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.
“It also remains to be seen what effect the Chancellor’s recent announcement to provide a universal discount on energy bills will do to confidence levels, as consumers continue to make difficult choices about how to spend their money.
“Cost and efficiency are still top of agenda for most operators, and crucially, understanding how they can protect their margins whilst remaining price competitive for consumers.”