Over the last few years, we’ve written about some of the top challenges facing some of the biggest industries.
In this post, we’ll be looking at some of the top challenges facing retailers in 2023 and beyond.
- Energy prices & the cost of living
- Retaining employees
- A decrease in brand loyalty
So, let’s dive right in. What are the top challenges facing retailers in 2023?
Energy Prices & The Cost of Living: The Impact on Retailers
The rising energy costs and cost of living crisis in the UK have undoubtedly impacted the retail industry.
Back in August 2022, The Guardian reported that rising energy costs would cause thousands of shops to close for good, as well as reporting at the end of 2022 that retail spending fell during the year due to soaring inflation, energy costs and the cost of living crisis.
Not good news for retailers.
With energy in particular, many retailers have been hit hard as a lot of retailers have large stores that consume a lot of energy coming from lighting and heating.
But it’s not just in-store that energy prices are impacting retailers.
The energy crisis has also impacted retailers through higher fuel costs for transportation and delivery with the price of moving goods from warehouses to stores or even from suppliers to warehouses becoming almost unmanageable for some.
All of this has made it increasingly difficult for retailers to maintain their (often small) profit margins and, in some cases, has driven up the prices of their goods for consumers.
For many, it’s simply become unsustainable and a lot of smaller, independent businesses have either faced bankruptcy or have gone out of business.
Rising energy costs and the cost of living crisis have also had a knock-on effect on consumers too.
Spending more on energy has severely impacted the amount of disposable income that people have to spend on non-essential items.
So, how can retailers overcome the issues surrounding the cost of living and energy crisis?
Reducing Retail Energy Bills
Lighting, heating, ventilation, and air conditioning are the most common uses of energy in stores.
As such, one way that retailers can try to reduce energy costs is by investing in energy-efficient technologies.
Retailers might want to consider switching to low-energy lighting, such as compact fluorescent lamps (CFLs) or light-emitting diodes (LEDs).
CFLs in particular typically use 70-80% less electricity than traditional bulbs and will last a lot longer too. LEDs are also a great option and in many cases have replaced CFLs as they turn on immediately and are even more efficient.
By replacing the lighting in stores to one of these options, retailers can save money whilst also knowing that they are doing better for the environment.
Retailers also might want to consider conducting regular energy audits, to help them identify areas of the business that are consuming too much energy.
Through energy audits, retailers can try to save money on energy by optimising their energy use by making things as simple as turning off lights and equipment when they aren’t needed compulsory!
It sounds simple, but it still astounds me to this day, just how many stores keep their lights on overnight. Stopping things like this can go a long way to reducing energy bills.
It’s also important to get employee buy-in, so it may also be worthwhile hosting a training session for staff explaining the needs and benefits of saving energy and how it can help your business during this particularly difficult period.
Unfortunately for retailers, it’s not just themselves and their energy bills that they need to consider when it comes to the cost of living.
They also need to think about how they can help their customers.
How Can Retailers Help Customers with the Cost of Living?
With consumers typically shopping around, looking for cheaper options and spending less on luxury items, retailers need to do more to entice their customers.
Here are a number of ways in which retailers could support customers during the cost of living crisis:
- Introduce value ranges – many retailers are bringing in cheaper “value” ranges to offer cheaper alternatives on everyday products for their customers, and so this may be something that other retailers may want to consider.
- Price Freezes – common among supermarkets, many retailers are committing to price freezes on their products to ensure that their customers are able to afford the essentials.
- Loyalty schemes – as well as the benefits of brand loyalty and incentivising customers to return to their stores, loyalty schemes can also help customers to save money or earn points to spend in-store at a later date. Win-win!
- Offering rental services – some retailers like Decathlon have decided to help out customers with big ticket items by offering rental services on their products.
- Offering payment schemes – For example, letting customers use things like Klarna where payments are spread out over a number of months.
It’s clear that with the cost-of-living crisis and energy bills not going away, retailers will need to make changes in order to survive. By implementing some of the tips above, they can help both themselves and their customers during this difficult time.
Decrease in Brand Loyalty for Retailers
It’s well known that brand loyalty has been on the decline for a number of years now and this has only been accelerated by the pandemic and the cost of living crisis.
But why are consumers less loyal to brands these days? Let’s take a look at some of the reasons behind it:
Increased competition has made it much more challenging for businesses to establish and maintain brand loyalty.
With the rise of e-commerce and so many options available to consumers today, people are often less committed to a single brand and are much more likely to switch to competitors if they offer better products, prices, or experiences.
Today, retailers need to work harder to differentiate themselves.
They need to be able to create strong emotional connections with their customers and try to continually innovate and improve their offerings in order to stay relevant and competitive.
Covid and the subsequent lockdowns saw an increasing number of people change their shopping habits.
With travel restricted, some shops closed their doors and people were no longer able to go to their favourite stores. As such, lots of consumers were forced to change their shopping habits, either choosing places local to them, or ordering online instead.
The rise of Amazon and the speediness of delivery have also had a huge impact, with people often preferring to get a guaranteed next-day delivery from the comfort of their own home, rather than going out to a physical store or waiting longer for deliveries from elsewhere.
Making More Informed Decisions
With social media and review sites so prominent today, consumers have access to a vast amount of information that allows them to make more informed purchasing decisions.
For example, when I’m looking at something in a store and thinking about buying it, I can very easily get out my phone, check the reviews for the product online, see what others have said about it, and even compare prices with other stores.
If I’m not getting the best deal there and then, I’ll typically leave the product and buy it elsewhere. With so much data available, consumers are now able to make real-time, data-driven choices.
This also ties in with a shift in consumer values.
More and more consumers are becoming socially conscious and again, consumers are able to have a better awareness of retailers’ environmental and social values.
As such, rather than staying loyal to specific brands, they’re more likely to show loyalty to the brands that represent their values as well.
What Can Retailers Do to Retain Customer Loyalty?
Retaining customer loyalty is essential for the long-term success of any business, so what can retailers do about this? How can they try to retain their customers?
There are several strategies that retailers could test implementing to build and maintain customer loyalty. Here are our top tips:
- Provide excellent customer service
- Offer personalized promotions and discounts. Start loyalty schemes & or subscription-based models
- Use email & social media to communicate with customers and provide them with news, promotions, and other information that is relevant to them
- Regularly introduce new products/services
- Solicit and act on customer feedback
- Create a positive in-store experience
- Offer convenient payment and return options
- Gather customer feedback, and use it to improve their products, services, and customer experience.
- Implement loyalty programs and rewards to incentivise repeat business and increase customer satisfaction.
By implementing these strategies, retailers can build and maintain customer loyalty and ensure the long-term success of their business.
It’s all about testing which ones work for you!
Retaining employees has always been an issue for retailers, but that has become significantly more difficult in recent years.
In fact, a survey from Korn Ferry showed that retailers saw higher year-over-year turnover for in-store, corporate and distribution centre employees in 2022, with more than a three-quarters (75.8%) turnover rate for all hourly in-store positions, up from 68% in 2021.
Statistics also show that retail employees often leave their roles at a rate that’s over four times higher than the average churn rate in other industries.
Losing staff is costly for any business, and with such high employee turnover, retail is no different.
Not only do retailers need to spend more on recruitment, onboarding and training new staff, but there is also lost productivity in the period when they’re hiring as well.
This all has an impact on the service they’re able to provide their customers.
Put simply, having a high staff turnover is not ideal!
But what’s causing this? Why are retailers struggling to keep hold of their staff?
Well, here are some of the common reasons that retailers struggle to retain employees:
- Low wages and high competition
- Lack of employee development and limited career growth
- Poor onboarding
- Lack of recognition
- Working in a high-stress environment
- Unpredictable schedules/working hours
All of these factors contribute to a challenging work environment for retail employees and make it difficult for retailers to retain them.
So, what can retailers do to try and improve their staff turnover?
Well, one key factor is simply paying them more! But, it’s not always that simple. With many retailers struggling financially, there isn’t always the budget to do so.
That’s why we believe that one of the key factors in addressing employee retention is by committing to developing and nurturing staff.
Commit to Developing and Nurturing Employees:
There’s nothing worse than being stuck in a job and seeing no routes for progression and not feeling supported by your employer.
For employees, it leaves them feeling unengaged, and lacking motivation and ultimately, they’ll be unhappy and leave the company. It’s no good for either party!
But, by providing their staff with training, professional development opportunities, and clear career paths, retailers can help to improve job satisfaction, reduce turnover and create a much happier culture.
It’s something that many businesses in other industries do very well, and it’s time for retailers to catch up!
This doesn’t just mean pay rises or promotions though. Offering your staff training and development programs or providing them with courses to help them acquire new skills and stay up to date with current retail trends can really help staff to feel valued.
It’s so important to encourage professional development and, where possible, support employees who wish to pursue additional education or certifications within their role.
As well as offering development, it’s important to acknowledge your staff and value their opinions.
At work, people crave recognition, and it really isn’t hard to give. Be sure to regularly acknowledge and reward employees for their efforts and contributions to the company and try to ensure that you have an inclusive workplace culture that values employee well-being and satisfaction.
Retailers can show their employees that they care, by collecting, listening to and acting on employee feedback. In doing so, businesses can help to create a positive work environment where staff feel listened to, supported, recognised and rewarded.
In doing the above, retailers can show their employees that they are invested in their growth, development and well-being, which in turn, can help with staff showing more commitment to the business.
Offer Flexible Working
Some of the common issues facing retail staff are that working hours are often rigid.
Schedules are often made on a weekly basis and staff are left wondering what shifts they’re going to get, which means that they aren’t able to make plans before they receive their schedules.
Things like doctor’s appointments, childcare and even just plans with friends and family are hard to arrange.
But, it doesn’t need to be that way.
Although many businesses (ours included) offered flexible working before the pandemic, it’s now nearly commonplace for businesses to offer flexible working.
Many roles offer working-from-home options and the ability to work flexible hours too.
For retail, this can be difficult and whilst it’s not always possible to allow staff to work from home, there are options for flexible working hours and better planning.
There are a number of ways in which retailers can allow more flexibility when it comes to working.
- Offering flexible scheduling – using technology/allowing staff to easily swap shifts
- Create schedules more than a week in advance to allow staff to plan ahead
- Offering fixed shift times for staff who need it
Of course, offering staff more money is another easy way in which you can help employee retention within retail, but as that option isn’t always possible, offering flexible working options and making sure that your staff are looked after will go a long way in helping retailers to retain their staff.
So, there you have it, the top challenges facing retailers in 2023.
Let’s recap, these were:
- Cost of living/Energy Crisis
- A decrease in brand loyalty
- Employee retention
What do you think? Is there anything glaringly obvious that we’ve missed? Leave us a comment below and let us know your thoughts.
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