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What can retailers do to mitigate the cost of living crisis impact on consumers into 2023?

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Currently, a variety of sources are telling us that the cost of iiving crisis (now at a 40-year high) will continue deep into 2023 and potentially beyond.

News of inflation rises, distribution challenges, employee challenges, product shortages, product price hikes and cuts in consumer spending, seem to be daily occurrences.

Recently The Guardian highlighted a report from Citi Bank, saying that inflation could hit 18% in early 2023. The article also indicates more pain this year for UK households, with dual-fuel tariff energy bills potentially hitting £3,717 in October (higher than earlier forecasts, which estimated £3,500 to £3,700).

Bank of England has also painted a gloomy picture. It says that the energy price hikes in particular, will push the economy into a five-quarter recession, with gross domestic product (GDP) shrinking each quarter, next year.

Retail impacts

Focusing specifically on retail, Barclays recently published a detailed consumer spending assessment examining 2022 mid-summer activity. 

It reported that 90% of UK residents were concerned about rising inflation and food prices. 

This was exampled with July retail spending falling 3.9%, compared to the same period, a year earlier. This was driven largely by a reduction in spending across grocery, home, general retail and household. Included in this, is a 4.2% drop on clothing buys, 11.4% on household, 0.8% in supermarkets (including 0.9% on grocery), 10.3% on electronics and 11.9% on furniture. 

After the pandemic boom it’s clear that when it comes to home improvements and furnishing in particular, consumers are significantly cutting back on these purchases. The only retail sales uplift registered in the Barclays report is Pharmacy, Health and Beauty, up at 5.6%. 

Turning the spotlight more specifically on grocery, recent Office of National Statistics figures show that food and non-alcoholic drink prices rose by 9.8% between the start of this year and June. The largest contributors to this being the rising costs of food. This is up from 8.7% in May and equals the highest rate since March 2009. The biggest food price hikes were seen in, milk, cheese and eggs. Other increases included the price of vegetables, meat and ready meals. 

The cost-of-living impact is clearly being felt across the retail sector.

Post-pandemic productivity uplift

The good news is that post-pandemic, UK productivity is up. 

According to the ONS, output per hour worked in Quarter 1 2022 was 1.7% higher than the average level in 2019, prior to the pandemic. In addition, output per worker was 7.2% higher in Quarter 1 2022 relative to Quarter 1 2021 and was 1.4% above its pre-coronavirus pandemic levels. 

Mitigate the impact

So, what can retailers do to mitigate the crisis impact and give their Boards and leadership teams the future certainty they need?

Focusing upon in-store productivity affords retailers the opportunity to invest and spend wisely, enabling them to deliver excellent service at the best possible cost.

Unleash your productivity opportunity 

Powerful data insights, that measure and highlight each area of in-store activity, enable retail leaders to identity and quantify growth and cost-saving opportunities. They benefit therefore, both retail organisations and the wider economy. 

Areas that can be scrutinised (and therefore improved) include:

  • In-store tasks and processes (all operational activity)
  • Labour and workforce (budget/ resourcing/ deployment/ automation)
  • Customer needs (behaviours/ responses/ feedback)
  • Shrinkage and loss.

Within grocery, productivity studies can also focus on additional areas such as Food to Go.

The key outcomes that productivity studies deliver, include:

  • More income for less spend (for example, reduced staff costs but the same level of sales)
  • More income for the same spend (for example, improved stock management and labour systems, driving more sales)
  • More income for more spend (for example, higher sales following a quantified investment in labour)
  • Less spend but the same income (for example, a reduction in store operational costs or labour costs).

The across-estate comparisons and industry benchmarking intrinsic to effective productivity studies, also ensure each financial improvement is not-one off, but continuous.

Next-level retail with SWL

Providing a quantified return on investment SWL Group International Ltd., stands shoulder to shoulder with international retail brands, to enable them to release their full potential through productivity improvement.

To discover more about how your retail operation can minimise the impact of the ongoing cost of living crisis – and the outcomes you can expect to achieve, call SWL’s Insights & Discovery team on – (0)1527 895020 or complete our contact form.

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