Guest Column | November 1, 2022

Why Retailers Are Champions To The Communities They Serve

By Thomas Harms, EY

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Once again retailers and consumer products companies are in discussion, this time the debate is not about supply chain problems and product availability (although that remains on the agenda) but about cost and, more importantly for consumers, price. Brands are walking a tightrope, balancing on one side inflationary increases that are driving costs up and on the other the knowledge that consumers are trading-down, which threatens to disintermediate them.

Meanwhile, retailers are resisting price hikes, protecting their customers as they face a cost-of-living crisis, and looking to improve their brand relevance through cheaper private-label offerings. This is especially important as the rising price of shopping baskets comes against the backdrop of increasing fuel bills and higher interest rates in many countries.

Prices are rising… 83% of consumers have seen increases in the price of food in the last 3-4 months and 75% expect prices to increase further in the coming 6 months. *

Consumers are worried … 59% of consumers are worried about the rising cost of living and 40% are concerned about their finances. *

I have often talked about the important role retailers have in society. Retailers are more than a place (physical or digital) to buy things, they also can act as negotiators, educators, advisers, and partners for the customers they serve and the brands they sell. During the pandemic, this was evidenced in many ways. Retailers made sure that what was available was distributed evenly, whether that was rationing toilet rolls or providing time slots for the elderly; as one of the few places we could go outside of our homes, retailers protected us in their stores limiting the numbers entering, implementing social distancing and increasing access to contactless payment technologies; and they rethought their business models to fast-track online shopping, home delivery, and click and collect, helping us get what we needed direct to our front door or car boot.

They can again be champions in a time of crisis – wielding their power with brands to moderate price increases, impose price caps, or guarantee fixed prices for a period of time. They can source cheaper substitutes, and own-band offerings and act as gatekeepers that provide a degree of protection from price hikes. By defending consumer wallets and taking control of prices retailers also can win consumer goodwill that will benefit perceptions of their brand at the same time.

Retailers can rethink their assortment of SKUs to fit their customer’s needs. This could be in the shape of a better budget range or renewed focus on private labels, introducing SKUs on profitable lines. Giving own brands more shelf space also will reinforce a retailer’s bargaining power on price, and dare I say it reduces the pressure and influence of brands.

Shopping baskets are shrinking… 25% of consumers are seeking cheaper food alternatives, while 28% are buying less food as a result of rising prices. *

The private label opportunity is growing… 63% of consumers are willing to try own brand products for fresh food and 51% are willing to buy own-branded packaged food. *

Consumption habits are changing… 34% of consumers intend to buy more second-hand products in the coming years and 39% feel that they already have more possessions than they need. *

But it goes beyond price and product. Retailers also can support consumers in other ways – for example, through food banks and education, promoting recipe ideas that make food go further; and driving sustainability by wasting less – retailers in some countries have acted to remove unhelpful “best before date” stickers from some products and are once again promoting ugly fruit (a must give the heatwave-stricken harvests across Europe). Retailers also can work closely with governments to monitor basket price size and collaborate on solutions to help protect those most vulnerable to price rises.

Retailers are a fundamental connection point with consumers. The access they enjoy in-store and online allows retailers to observe and interact with their customers in a way that many consumer product brands do not. It’s something to capitalize on in these tough times, but also comes with responsibility. As retailers actively engage with consumers, they must also take the needs and concerns of their customers seriously by finding solutions to the unenviable choice between eating and heating that many could face this winter.

*Source: EY Future Consumer Index

About The Author

As EY Global Retail Leader, Thomas Harms is responsible for defining and implementing the EY strategy for the retail industry. He helps ensure that EY retail clients are well served across geographies, leading over 20,000 EY professionals worldwide.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.