We recently ran our Lunch & Learn webinar looking at the implications of inflation for customers, operators and suppliers. Click below to watch:
We’ve packed a lot of thoughts into this quick read below and the video above. To learn more, get in touch to book in a chat with Sarah and Dan:
What does it mean for shoppers?
This is going to be a very challenging time for shoppers, particularly those with less room to trade down to value or discount ranges and retailers. According to Torsten Bell at the Resolution Foundation…
we’re seeing the “highest rate of inflation since 1982”.
How will operators and retailer manage?
Own label’s moment has arrived. Unilever is raising its prices across its brands by 8%, giving retailers an opportunity to win market share with competitively priced, tasty store cupboard staples and high performing household essentials. Aldi’s Mamia range is good example of how to achieve this. Its nappies consistently win awards from parents and judges alike. Challenging Proctor & Gamble’s market leader Pampers on both price and performance. The success of the core product has a halo effect on the entire baby range which now includes everything from food to wipes and of course, Special buys. In conclusion, Aldi can now confidently offer a credible own-label baby and toddler category, incentivising parents not to look elsewhere.
If own label is the opportunity, staffing is the challenge. According to IGD, the workforce is currently 12% under strength with one in ten retail jobs empty. With some older workers choosing to leave the workforce and Brexit halting the influx of Europeans, supermarkets are raising their wages in a bid to both attract and retain workers. Above all, hospitality operators are addressing longstanding issues around pay and conditions and seeking to offer better pay as well as flexibility. The challenge here is ensuring that a more attractive employee offer does not negatively impact customer experience.
What are the implications for suppliers?
News reports suggest that buyers at one of the Big Four are asking their suppliers to match the prices they offer their buyers at one of the discount homeware chains. Similarly, the buyers justify this request on the grounds that they require “funding” to reduce prices for their customers. At face value, this does not sound unreasonable. Same product, same price, right? However, it’s worth noting that discounters’ lower per unit prices reflect the fact that they are considerably easier to deal with. For instance, there are fewer hoops to jump through and favourable payment terms that ease cashflow. In other words, we could argue that if legacy retailers want their buyers to achieve price parity with the discounters, they need to look at both sides of the bargain.
Is price the only thing that matters?
Customers with limited budget to accommodate price increases will always be incentivised to seek out the lowest prices. However, looking beyond the least affluent, IGD Research shows that shopper sentiment across the board is low, with nearly every socioeconomic group seeking savings. In addition, this mindset shift throws up opportunities for retailers who can tempt shoppers who are trading down. For instance, from eating out to premium dine-in meal deals, or from full-service restaurants and pubs to QSR. Waitrose is emphasising the value of its Essentials range; “quality you’d expect at prices you wouldn’t”, while Aldi suggests that customers change their supermarket rather than their lifestyle, by switching to the discounter.
To learn more, get in touch to book in a chat with Dan and Sarah:
