The Chancellor of the Exchequer’s Spring Statement has gone someway to address the cost of living rise, but there is precious little in it for retailers to gather much cheer from.
As businesses, they will see a cut to some costs, not least for taking on retail apprentices, but other than that reductions in energy costs, a long-term reduction in business rates and even a moratorium on VAT rises failed to materialise.
The only real hope that retailers can hold out for is that the other measures that Rishi Sunak unveiled will encourage consumer spending. High hopes that the removal of Covid-19 restrictions would see a surge in high street sales have been all but dashed by the cost of living increases that consumers now face.
High energy and fuel prices impacting the cost of travel, transport and above all food are already taking their toll on spending – and it is a toll that rings out across all sectors. Shoppers simply have, once again, lost their confidence to spend today as they may need the money tomorrow.
This is set to have a particularly stark impact on ecommerce. A study by Salsify suggests that it is going to hit D2C sales the hardest and play straight into the hands of Amazon. It finds that just 19% of UK shoppers expect to make purchases on a brand’s D2C site, while 61% are set to buy via Amazon – driven almost entirely by price.
The study shows that a third of shoppers in 2022 are choosing where they shop and what they buy based on price, while a fifth also factor in delivery, looking to spend more if it arrived sooner. And this is repeated across all sectors from fashion to grocery to DIY.
This changes, once again, how retailers need to approach how they sell. While the tropes of sustainability and ethics are still a high priority to consumers, right now the real driving force for many is affordability, not just price. Shopping volumes will decrease as unconfident shoppers delay or give up on purchases unless they deem them essential to their lives.
The problem retailers now face is that they need to cut prices, while still maintaining a sustainable and ethical approach, all the while battling their own rising energy, material and staffing costs. They also have to up their marketing nous to compete even harder against marketplaces, particularly Amazon.
