Small and local retailers set to start 2023 in survival mode, but growth still on the cards

The cost-of-living crisis, rising inflation and fears of a recession are creating considerable challenges for retailers and restaurants in the UK, according to new research commissioned by Glovo, a leading multi-category players.

The research found that changing consumer habits post-pandemic, further impacted by the current economic downturn, are causing more than half (56%) of businesses to see themselves unprepared for the future. In the UK, 80% businesses worry about their future profitability, with 32% facing the challenge of reduced consumer spending.

The study of more than 3,200 small and medium-sized food, grocery and restaurant businesses across nine markets in Europe and Africa (the UK, Spain, Portugal, Italy, Poland, Bulgaria, Kenya, Romania and Morocco) found that more than one third of SMEs (34%) regard reaching new customers as their main challenge, with 25% of UK businesses saying the same. In the two African markets surveyed that number is even higher, with 40% in Kenya and 46% in Morocco saying this is their main challenge.

The research also found that almost half of businesses in Spain (46%) are finding it difficult to keep up with the pace of change. In Morocco, over half (58%) of businesses are worried about their profitability, and 59% say they lack the resources they need to optimise customer service.

Among the factors causing SMEs to seek additional support and solutions were changing consumer habits, high inflation, lower consumer spending and overarching macroeconomic risks. 

Rodrigo Alier, Executive Director, Partners & Brands at Glovo, comments: “This research confirms that, unsurprisingly, just as SMEs are moving past the hangover of the pandemic, they find themselves struggling once again. The cost of living crisis weighs heavily on their minds and their balance sheets, with  more than two-thirds of businesses surveyed in the UK and nearly half of those in Spain saying they are in ‘survival mode’. Across all nine countries, an average of 46% of businesses say the same.

“More than half of all businesses surveyed say they are unprepared for the future and with 80% of UK businesses fearing the same, more must be done to give them the resources to optimise customer service and experience, and ultimately support their growth so they can thrive.”

Digitisation crucial to changing consumer behaviour

According to the study, the customer behaviour has changed considerably over the last 2-3 years, with 2 out of 3 Italian businesses stating that it was the necessity to maintain business processes during the pandemic that prompted them to digitalise. 78% of UK businesses say customers are now more concerned about their digital experience than their in-person dining experience. While 57% in Romania say consumers are now more focused on digital than their in-store experiences.

In response, a third (33%) of UK businesses see digitisation as integral to growth, and nine out of ten businesses have implemented new technologies to help them become more agile. Yet this may prove a steep challenge, with 63% of businesses in Portugal saying they have never been digitised and 61% of companies in Spain saying they were not digitised pre-pandemic.

Looking ahead to solutions, half (50%) of UK businesses want to invest in marketing, followed by improved customer experience (45%) and tech and innovation (41%). Better ways of understanding consumers are also needed. In Portugal, 72% of SMEs say face-to-face consumer feedback is their main source of information. 

Sustainability is also an increased focus for UK businesses, with 40% investing in sustainable packaging options, and 85% of consumers wanting to have more sustainable options in the stores and restaurants they use—a trend consistent globally.

Growth still on the agenda for 2023

The research also reveals that, despite the current economic turmoil, 82% of UK business decision-makers say they’re targeting significant growth in the next 12 months, while 74% of companies in Spain agree. 

The role of a technology partner is set to grow, with 82% of UK businesses saying one would help their business to innovate and scale at speed, and almost half (46%) of respondents globally saying the same. While 2 in 5 UK businesses say that a technology partner combined with optimised delivery methods, such as ultra-fast delivery, can help them prepare for the future. Considering 40% of UK businesses are currently struggling to ease their delivery operations, this is of particular significance. While in Italy, 80% of businesses say a delivery player is both fundamental and necessary for their business.

The research follows the recent launch of Glovo Local, a new program designed to help small and medium-sized retailers and restaurants digitise their business and grow their online presence. Glovo Local follows the rollout in all 25 markets Glovo operates in for its 150,000 partners, which is expected to expand to 250,000 by the end of 2023.

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