It’s no secret that the last couple of years have had a phenomenal impact on the retail landscape. The pandemic caused the closure of stores worldwide, with around 8,700 British chain stores shutting their doors in 2021 alone. Surviving store owners have had to adapt at break-neck speed to new changes in customer demands and purchasing trends.
Countless “traditional” brick-and-mortar stores transitioned to hybrid and omnichannel selling in 2021 and 2022, introducing new ways for customers to shop online, leverage delivery services, and even take advantage of click-and-collect opportunities.
While softening restrictions in 2022 have allowed some companies to re-open their physical locations, retailers’ challenges are far from over. Not only do these companies need to adhere to new customer expectations for contactless, personalised service, but they’re also now dealing with a different set of threats imposed by impending recessions and energy crises.
So, what will these changes mean to the future of retail?
The Impact of Rising Energy Costs on Retail
At present, the biggest threat facing stores strong enough to survive the pandemic comes in the form of rapidly rising energy costs. Throughout the United Kingdom, energy prices have soared to record-breaking levels, leaving many unable to pay their monthly bills. These huge energy costs aren’t just a major concern for consumers; they present a significant problem for business leaders too, who are already struggling with depleted post-pandemic budgets.
According to one report from the Federation of Small Businesses, around 15% of SMBs believe they may have to either downsize or close completely due to spiralling energy expenses. With the energy pricing cap set to continue rising into 2023, the issue could soon become a lot worse.
It’s not just niche businesses feeling the pinch either. The Association of Convenience Stores, which represents around 48,000 stores in the UK said energy bills had soared to an average of around £45,000 for some smaller members. Collectively, the ACS says its members are facing energy bills worth approximately £2.5 billion.
If government bodies don’t step in to reduce the expenses these companies face, the average UK consumer could find themselves with a lot fewer options in where to shop going forward.
The Trends Likely to Emerge Going Forward
While it’s difficult to know for certain what the new energy crisis challenges will mean to the future of retail and commerce, there are some trends which are likely to be important for today’s companies. First and foremost, the transition away from in-person retail into omnichannel and digital commerce is likely to continue as fewer businesses can afford to run their own physical location.
During the pandemic, many businesses already began creating e-commerce versions of their stores to give consumers a way to continue purchasing essentials when brick-and-mortar locations were closed. The use of e-commerce opportunities may continue to accelerate as businesses look for ways to reduce the overheads associated with running a physical store.
Outside of the transition to more digital commerce options, we’re also likely to see an increasing focus on customer experience to help “recession-proof” struggling businesses and maintain customer loyalty as retailers are forced to raise their prices. If bills continue to accelerate for retail stores, there’s a good chance the cost of common products will also rise to ensure these businesses can stay open. Unfortunately, many consumers will quickly abandon a store with rising prices.
Fortunately, better customer service could be the answer. According to one study by Ipsos, around 70% of women and 75% of men say they’re more likely to continue buying products from brands even after they raise their prices, if they feel “valued” by the company.
Ipsos isn’t the only group to establish the benefits of maintaining high levels of customer experience in an economic downturn either. Leading analysts like McKinsey and Forrester have found customer experience leaders have 3 times higher total returns than their counterparts during difficult periods.
What Does the Future Hold for Retail?
With economic uncertainty on the rise, along with business energy bills, retail companies have a number of challenges to deal with in the pipeline. However, there may still be ways for these companies to protect themselves. Embracing new forms of digital commerce and doubling down on excellent customer service will give more organisations hope for the future.