The Retailer Autumn Edition 2022

AUTUMN 202 2

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Attempts to pass cost increases onto customers is a delicate balancing act in the fiercely competitive retail sector, ramping up the importance of knowing your customers, and the logistical challenges of providing the ‘right product, right place, right time’. Layer on production costs, where suppliers are also feeling the squeeze through increased materials and labour costs, striking that balance becomes even more of a challenge, especially for Retailers who trade on a discount / low-cost model, where selective price increases will need to be adopted, like Primark with its Autumn/Winter range. Strategies need to focus on shorter, flexible, and more agile supply chains that can deal with supply shocks and address shifts in consumer behaviour – including on-shoring and near-shoring, deglobalisation, and contingency planning to mitigate bottlenecks and changes to supply. Retailers are also forming “inflation control towers” bringing together cross-business teamswith senior sponsorship to centrallymanage inflation ary asks (with the right insights) instead of leaving this to individual buyers. For those Retailers looking at a cost-cutting approach, a strategic appli cation is key rather than a blanket percentage-driven ‘slash and burn’ approach. Cost reductions need to ensure that value is preserved by looking at costs in terms of the value they bring to the business and what is really needed. Consumer behaviour – A continuously evolving dynamic The power dynamic shift from retailer to consumer was already in full flow prior to inflationary pressures, with the rise of “Metail” consumers have never been more empowered in the way they shop. However, for millions of people in the UK, much of the support outlined in the recent budget announcement will be swallowed up by soaring energy bills, higher mortgage payments, and higher costs across the board are squeezing household budgets, reducing discretionary spending. Irrespective of the current inflationary climate, ESG is still high on the corporate agenda for many retailers, and for reasons beyond the envi ronment. Consumers nowmake purchasing decisions on how a company acts, their values, and the materials that they use. But standards come at a cost, adding to the inflationary pressures being felt by retailers and customers alike. Retailers, therefore, need to be smart with their tactics and adopt a more agile approach, flexing with the unpredictable nature of the consumer, and work hard to retain their loyalty. If they don’t offer perceived value, consumers will switch brands.

Developing a strong value proposition is key to the more cost-conscious customer, anchored around value for money. Adopting the right tone and reaching new audiences will be critical in protecting market share through authentic communication. There is a challenging period ahead for retailers in the UK as disruption and market conditions continue to test management teams. Retailers now more than ever need to build agility into their DNA to deal with both short and longer-term challenges.

To hear more about our Retail Outlook, or for more information on how AlixPartners can support your business through this period of disruption, get in touch.

Dan Coen dcoen@alixpartners.com +44 7557 144 129 Richard Harrison rharrison@alixpartners.com +44 7771 501 030

Matt Clark mclark@alixpartners.com +44 7947 730 225 Clare Kennedy ckennedy@alixpartners.com +44 7887 678 503