To cut taxes and reduce inflation, or to cut back and bring down the cost of living: these are the two choices on offer from the candidates to be the UK’s next Prime Minister. For SME retailers, neither really offers them any hope of a way out of a crisis that continues to build.
News this week finds that SME retailers and brands are struggling. Half of them are already reporting that they have had to radically raise prices to cope with savagely – and rapidly – increasing costs, with many having to up their ticket by between 10 and 20%. This naturally gets passed onto the consumer, driving up inflation, worsening the cost-of-living crisis felt by many and leading, ultimately, to pay rise demands and increased costs. And round we go.
Many of these same retailer are also having to take other drastic actions to manage costs – actions that feed into this vicious cycle. Two in five (40%) are holding off expanding or opening new premises in the next six months. Half (48%) say they’re unlikely to hire any additional employees, while two in five (40%) hold off on opening new or additional premises due to the current economic climate.
One in five (20%) say they’re even unlikely to purchase any new equipment or tools, as owners look to reduce spending.
Those that do want to invest and expand their way through the crisis are also hitting a wall. More than one in five (22%) small and medium sized enterprises (SMEs) that needed external finance and/or capital over the past two years were unable to access it. In fact, more than a quarter (27%) have had to stop or pause an area of their business because of a lack of finance.
The biggest barriers faced by SMEs in sourcing external finance/and or capital were that it was too expensive (23%), the process took too long (19%) and that there was a lack of flexibility with repayment terms (17%).
The news is particularly worrying as it flies in the face of what retailers want and, in many cases, need to do. Research shows that 40% of ecommerce businesses in Europe are planning to open a physical store, while organisations such as the British Retail Consortium (BRC) are urging them to also invest in diversity. Both of these are business necessities – and retailers get that – but this comes at a time when many can’t afford to do this, nor are they able to raise the necessary funds.
It is no wonder then that the likes of YouTube, Instagram and TikTok smell an opportunity. All three social sites are ramping up their ecommerce offerings and they have SME retailers and brands in their sights. All three offer a relatively easy and cost-effective way to expand a retail business – in both reach and geography – through less conventional means. YouTube is working with Shopify to allow ecommerce sites run on the latter’s platform to live stream and monetise their video content on the site. Instagram is extending its shoppable posts offering to small retailers and brands and TikTok continues its march into allowing online selling to such an extent that it has become the fastest growing ad platform for SME retailers.
All three realise that, with constraints on traditional ecommerce and physical retail, the only viable expansion option for many is to better leverage social. For retailers this offers a simple way to reach new people and could offset the losses being made in the more traditional ways of selling.
The upshot, when whoever takes over as leader of the UK’s outmoded political structure gets their feet under the big desk, will be that the retail landscape will have shifted again. It may also point to how macro-economic effects such as inflation may yet be something that can be tackled by businesses themselves rather than impotent governments. So, it’s not all bad.