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The latest data from the Office for National Statistics (ONS) has revealed that 49% of consumers said they are consciously buying less food and drink than they were at the start of the year. In fact, the Institute of Grocery Distribution (IGD) added that 60% of shoppers are now spending time saving money, up from 55% in March.
This data comes as inflation hits a 40-year high, with the IGD also estimating that food inflation will peak at 15% this summer.
At the same time, nine out of every 10 people surveyed (91%) by the ONS reported that their cost of living had risen over the last month.
This presents an opportunity for indie retailers championing a ‘quality over quantity’ approach to food.
Sales down across the retail sector
The retail sector is experiencing a downward trajectory in sales as the cost of living and inflationary pressures bite.
Helen Dickinson OBE, chief executive at the British Retail Consortium, explained, “Sales volumes are falling to a rate not seen since the depths of the pandemic, as inflation continues to bite, and households cut back spending.
“Discretionary purchases were hit hard, especially white goods and homeware, while consumers also traded down to cheaper brands in food and non-food alike.
“Retailers are caught between significant rising costs in their supply chains and protecting their customers from price rises. The government needs to get creative and find ways to help relieve some of this cost pressure – the upcoming consultation on transitional relief is a golden opportunity to ensure that retailers aren’t overpaying on their business rates bills. Government action on transitional relief would make a meaningful difference to retailers’ costs and ease pressure on prices for customers.”
The Jubilee weekend was a success for retailers, especially those in fine food championing British specialties as the public indulged in street parties. In fact, sales grew by nearly 1.5% year on year, despite the rising cost across most items.
However, according to Helen, “While the Jubilee weekend gave food sales a temporary boost, and fashion sales benefited from the summer holiday and wedding season, this was not enough to counter the substantial slowdown in consumer spending.”
The appeal of feel-good localism
IGD’s latest Shopper Confidence Index reached a new record low in June as shoppers contend with the cost-of-living crisis, but as EIT’s Trust Report showed, consumers trust small retailers the most, and indies can use this to their advantage.
As shoppers make difficult choices and aim to spend less, indies can focus on their local appeal and embrace the feel-good factor.
Paul Martin, UK head of retail at KPMG, explained, “As the cost living crisis continues to deepen, retailers face walking a fine line between protecting margins and further denting consumer confidence by passing on price rises whilst negotiating with their suppliers to share the cost increases. Cost and efficiency will dominate retailers’ agendas as they are forced to make some tough decisions on which products will make it to the shelves in order to remain price competitive for consumers.
“With a long run of hot weather predicted and many consumers choosing to holiday at home this summer, retailers will be hoping that the feel-good factor begins to improve confidence amongst some shoppers – as presently overall confidence levels are lower than sales may suggest.”
Susan Barratt, CEO of IGD, added, “With record petrol prices, being able to walk to a grocery store is also increasingly important with 27% of shoppers agreeing this is a driver of store choice, compared to 24% in May.”
In this way, indies can promote the savings made on petrol and the wear and tear of their vehicles by encouraging shoppers to shop in their local stores rather than driving out to retail parks.
While the outlook continues to challenge retailers, Susan believes good weather might provide a welcome boost in July, as picnic and BBQ season comes out in full force.