Third month in a row retail sales have hit lowest levels since records began in 1999
The industry body's report - complied in partnership with accountant KPMG - shows total retail sales dropped by 1.5 per cent in January compared to a year ago showing consumer confidence remains weak going into 2012.
Food sales rose by 2.8 per cent on a year ago, though non food sales dropped by a record 5.5 per cent against January 2011 figures.
This was despite a huge effort from the high street in slashing prices well into the new year in an effort to bring customers in.
These latest retail figures follow on from record sales drops reported for November and December of last year, meaning the past three months' retail sales drops have been the worst since the SRC began compiling sales figures in 1999.
Ian Shearer, Scottish Retail Consortium director, said: "A sales decline on this scale sets alarm bells ringing for Scottish retailers.
"Combined, as it is, with some above-inflation cost pressures, there are potentially worrying implications for Scotland's largest private-sector employer.
"The good news is food sales growth picked up after a disappointing December but non-food sales fell dramatically, despite all the discounts and promotions, which themselves hit margins.
"Customers have confronted reality again since Christmas. Consumer confidence remains low, Scottish household incomes are being squeezed by increased utility and fuel prices, and continued fears over job prospects and the wider economy are front-of-mind for many deterring purchases which are not immediate needs.
"The comparison with a year ago, when there was a final burst of pre-VAT-rise spending, is also not helping this years figures.
"The biggest year-on-year drop in overall sales in over a decade is a sign of troubled times for retail."
KPMG's head of retail, David McCorquodale, added: "January was a particularly difficult month for retailers with the significant drop of 2.6 per cent in like-for-like sales from the year before being indicative of the challenges which the retail sector will face in 2012.
"When set against the backdrop of the deep discounting which many retailers undertook during the festive period in order to stimulate consumer spending its even more concerning to see that momentum stop and for sales to suffer such a marked drop.
"Already in 2012 we have seen several big name retailers fall victim to the tough trading environment and unfortunately this trend looks set to continue as consumer confidence continues to waver in the face of economic uncertainty and widespread worries about job security.
"These figures show heavily promoted sales and discounts will help retailers stave off some of the pain but in the long term these tactics are not sustainable for businesses looking to remain profitable."
Scotland's chief statistician reported at the start of February Scotland's retail sector had outperformed the rest of the UK in 2011.
According to the Scottish Government's latest Retail Sales Index (RSI), the value of retail sales across Scotland rose by 3.5 per cent over the course of 2011 compared with 3.4 per cent for the rest of the UK.
It said the volume of sales across Scotland last year rose by 0.7 per cent compared with 0.3 per cent for the rest of the UK.
However a reclassification in how RSI is calculated was introduced in 2007.
This led to automotive fuel sales being reclassified as a retail activity and repair of personal and household goods reclassified out of retail sales.
Speaking on the latest retail figures, a Scottish Government spokesperson said: "These figures offer a partial account of the performance of retail sector in Scotland, and there is no doubt that circumstances remain difficult due to a lack of growth in the UK economy.
The spokesperson added:"We are taking every possible step to enhance economic and consumer confidence, as well as support business through difficult trading conditions."