How will the cost of living crisis impact the retail sector?

With prices soaring in a post-pandemic, post-Brexit world, the combination of supply chain issues, the war in Ukraine, inflation and political unrest have taken over our newsfeeds, and likely will for the foreseeable future.

Not only are most people individually feeling the impact of the cost of living crisis, but many industries and sectors across the country are experiencing changes in their business performance as a result, too.

So, how is the cost of living crisis specifically impacting the retail sector?

Buyer habits are changing

Retail relies on one key factor: customers being able to purchase things that they want and/or need. Affordability is increasingly affecting purchasing decisions, which, as a result, is then leading consumers to buy less food and household items. 

As an increasing number of consumers now have difficulties in paying their regular household bills, combining this with a lack of financial backup or savings, means that regular income to spend on retail goods is under even more pressure – regardless of whether the items being purchased are essential or not.

Every person is impacted to some extent by inflation, but the effects are not experienced evenly across society. It is important for people to realise that low-income households are far more negatively impacted, as they spend a much larger proportion of their weekly or monthly income on food and energy. Therefore, as a consumer, their buying habits will change significantly, through no choice of their own.

What does this mean for retailers?

Inflation has resulted in a large number of low-income households cutting down on their monthly spending, or changing the products they buy and opting for non-brand, low-cost items. Retailers like Aldi and Lidl have seen a significant increase in their customer numbers, and it is no surprise given that they are the cheapest UK supermarkets.

Plus, low-income households aren’t the only ones opting for cheaper groceries – people with varying incomes are changing their buying habits as a result of the increasing costs of goods, both in stores and online.

With that being said, the more affordable retailers such as Aldi, Lidl, Primark, B&M and Home Bargains will need to take into account not only how much their products cost, but also how their consumers prefer to shop, in order to remain competitive. As inflation levels out and decreases over time, consumers will be able to vary the retailers from which they buy their goods, meaning they will do so in the way that best suits them.

Are enough budget retailers online?

According to research by Pay360, consumer habits and preferences have changed drastically, and some, irreversibly. For example, as of 2022:

• 22% of people say they ‘like or love’ in-store shopping, compared to 26% saying the same about online shopping
• 24% of people don’t like in-store shopping, compared to 15% who dislike online shopping
• 46% of Gen Z shoppers like or love online shopping, compared to 10% of those aged 76 and over
• 29% of women like or love online shopping, compared to 22% of men

Whilst many low-cost UK retailers are performing well as a result of their in-store customer experience, it is imperative that they invest in their online ecommerce options to best serve their consumers going forward. Not only will more people opt for online shopping as time goes on, but those who already have a notable online presence with their customers will have the advantage against those who have relied heavily on in-store shoppers.

With the cost of living crisis looking to last until, at the very earliest, mid-2023, now is the time for those working in the retail sector to not only assess their consumer habits and product prices, but also what will bring them the most revenue going forward by giving their customers more buying options.

Are you recruiting in the retail sector? 

McCarthy Recruitment works with some of the biggest and most well-known names in the UK retail sector, as well as some of the industry’s top talent who are currently on the lookout for an exciting new challenge. 

Contact our dedicated retail recruitment team on enquiries@mccarthyrecruitment.com or 0161 828 8726 who will tell you more about our retail recruitment services.