It’s just like the 70’s all over again!
The start of this year picks up from a fragile 2022 with a UK economy just waiting (it seems) for recession. In a recent report the IMF predicted a 0.6 per cent contraction in the UK’s economy which, if it happens, will make us the only G7 country to see a contraction in 2023/24.
Of course, predictions don’t always come to pass. Retail sales according to the British Retail Consortium picked up in value during the last two months of 2022 against expectations, and many retailers I’ve spoken to this year so far seem to be enjoying the continued boom. Prices overall have increased and volume sales may well be down, but as long as you have a consistent footfall of customers through the door that’s not necessarily a bad thing.
That footfall is the key as we all know, and there are plenty of factors that could tip the balance: further increases in the cost of living, rising interest rates (making it difficult to borrow) and increased unemployment to name but a few. For now, consumers are still spending and let’s enjoy it while that trend lasts.
However, it would be prudent to plan for a future in which consumer spending starts to wane. This is where things start getting competitive and where businesses that haven’t prepared for it start to feel the pressure.
To my mind the COVID pandemic taught us a lot, and maybe we can use what we learned back in 2020 to help us prepare for 2023. Many businesses – retailers included – thrived during the pandemic. Once we’d ploughed through the initial disruption we learned to eliminate wasteful costs and focus on how to survive. We experimented with new ways of selling and explored new avenues to reach our customers. We created customer experiences that were different to those we’d relied on in the past.
With change forced upon us we realised that we could adapt, change what we’ve always done and yet continue to drive the business. No one is saying it was easy, and in many cases it wasn’t without some financial help, but we all found a way.
Retailers played to their strengths. Independents that were close to their communities became closer still. Many diversified into areas outside their comfort zones – some even conceding that they should finally get around to creating an online shop!
Right now there’s a lot of talk about sustainability. With the increased cost-of-living it makes sense for consumers to invest in products that will last longer and cost less to run. That’s not so great for retailers for whom replacement products represent a large slice of their turnover.
So what else can retailers do? We talk about retail experiences – so much that it’s now become a cliché! But think about what that means. What did it mean during COVID? What did you have to change to keep your customers engaged with your business? How did you make a difference then, and how can you make a difference now?
With communities now open, think about why your customers will still remember you and still want to buy from you, even when times get tougher? Is there something else that you can offer them – another product, solution or service that can benefit you and your customers? How can you leverage your strengths to ensure that your business continues to grow?
Unfortunately I cannot answer that for you, but I hope that in posing the question you will think about it. I don’t think retailers can rely on footfall being sustained throughout the year. The changes this year may not be abrupt or severe, but often the slower trends hit harder.
Perhaps 2023 will play out better than forecasters predict; there’s no way to be sure. But even when the going is good, it doesn’t hurt for businesses to look at ways of consolidating their position and planning for growth under pressure.