Retailers experienced many more challenges in December, which is typically their busiest month of the year. According to ONS data, consumer spending was down 3.7% compared to November, and 0.9% compared to December the year before.
It comes as data from the British Retail Consortium (BRC) also highlighted significant changes in consumer buying behaviour over the period. For example, loungewear sales rose, but demand for occasion wear fell, despite December traditionally being a time for going out and socialising.
The findings come as little surprise after lockdowns, home working and pub closures have prevailed for the last 22 months. And while retailers across the UK are now well versed in how to ‘pivot’, this data suggests that their adaptability will continue to be put to the test.
As we look ahead to 2022, the new year brings fresh challenges, as both businesses and consumers face ‘the big squeeze’. Inflation is set to peak in the spring, taxes will rise and the energy price cap will be lifted – all of which will have an impact on consumer confidence, consumer spending, and the margins retailers make. To add to this, staff availability will likely be stretched, technology requirements will evolve, and government-backed lending schemes are scheduled to end in June, placing additional pressures on retailers to drive profitability.
So how can retailers navigate these uncertain times? It’s time to reflect on and review what worked well in the past as we attempt to plan for continued uncertainty in 2022.
Focus on your strengths
A good starting point is to consider the key strengths that are core to the success of your retail business – that could be brand, product offering, location, pricing or your team – and what your key values and vision for your business are.
By asking these questions, retailers can determine if short-term changes are appropriate or if they need to consider a greater overhaul of their business model. This could include moving office locations, switching software providers, or hiring more staff to facilitate a pivot in product creation and operations.
Are you financially exposed?
It is also important to have a good understanding of your finances. What makes you vulnerable to change? What reserves do you have if investment opportunities arise, or do you need a contingency fund to weather some challenges?
Consider some key changes to your major revenue and expense items and what you may be able to do to mitigate the impact. For example, what would happen if key costs increase by 5% or 10% or sales decrease by 10% or 20%?
It is important to also consider the upsides – for example, if sales rise faster than expected, would there be any risk to your operating cash flow (e.g. from stocking up or waiting for customers to pay). Would there be any additional expenses – such as additional staff to support you or more storage space and freight?
The great resignation
In an environment of staff shortages and many discussions about the “great resignation”, you can’t overlook the value of your team.
Retailers should ask themselves, do you know where your biggest people dependencies are? Do you know what motivates them and are there ways you can give them new opportunities?
It’s also important to consider the wider skillsets of your team in case you need to readjust roles if any of your team fall ill or decide to leave.
Never break the chain
Supply chain delays and inflation are the other big challenges for 2022. Take the time to understand what your sourcing options may be if costs increase or there are delays.
Consider if there is scope to split your purchases amongst multiple suppliers or reconfigure your offering to keep costs down.
Make the numbers add up
Amid all these changes, it can be hard to keep on track of finances and make sure numbers meet. Retailers should make use of savvy saving tools available to them, or use financial apps that offer greater insights on their outgoings.
Additionally, reviewing their bank account provider could bring retailers a small windfall, with some – such as Starling Bank – offering fee free business accounts, and handy accounting tools such as the Business Toolkit. It’s about getting smart with what’s going out and what’s coming in, and always trusting the numbers.
Confidence in 2022
While 2022 will be unpredictable, the good news is that confidence amongst retailers is high. Starling Bank research, conducted in partnership with the British Independent Retailers Association (BIRA)*, revealed that independent retailers have found opportunities during the pandemic.
The findings revealed that half (51%) of independent retailers believe their business is more successful than it was pre-pandemic, nearly three quarters (72%) have increased their sales, and two-fifths (39%) have acquired more customers. In addition, a separate Starling Bank study found more than two-thirds (68%) of SMEs are feeling confident about 2022, with 11% revenue growth expected.
It’s time that independent retailers maintained their entrepreneurial spirit. By thinking early enough in 2022, they can be on the front foot when it comes to increasing sales from their customers, and ensuring that their financial plans stack up.
If you want to pivot your business, the Starling Bank website has a business guide that’s packed with useful insight.
*Research based on survey to 316 independent retailers
