The last two years have been difficult for retailers, to say the least. Brexit, covid, lockdown, freight blockages, staff shortages – it’s been a perfect storm of bad news seemingly designed to derail hard-working retailers in the UK and Ireland!
For a brief moment in early autumn, things were looking up, reports showed retail footfall was back at pre-covid levels and consumer confidence was heading in the right direction. But then it started… empty shelves, fuel panic buying, omicron madness.
It’s not surprising that many retail multiples began revising their profit predictions downwards as the headlines became more gloomy.
But the new year is a time for optimism and while there are challenges ahead for retailers there are also opportunities. Let’s take a look.
Retail Challenge 1 – Freight shortages
The closure of ports during various lockdowns across the world, a shortage of shipping containers, followed by a lack of HGV drivers (not to mention a ship getting stuck in the Suez Canal!) all resulted in a logistical nightmare for wholesale and retail merchants in 2021. And unfortunately, this instability looks set to continue well into 2022.
It is not uncommon for clothing brands to source their fabrics in Europe or India, ship them to China to be manufactured, before shipping them back to Europe for distribution. It’s not surprising then that the cost of international shipping has doubled (or even trebled in some cases) and all of this has had a massive impact on manufacturing and supply chains.
In the short term, those increased costs have been passed onto retailers, with prices starting to increase in November for the first time since May 2019.
The good news is that it has highlighted to many brands how unsustainable and vulnerable their supply chains are and there is a move to bring manufacturing closer to home.
For retailers, this is a trend to lean into.
With green issues at the top of the trend barometer, reducing the miles your product travels on its way to your shelves is a way to chime with the new generation of shoppers.
Look for suppliers who manufacture in the UK, Ireland or Europe as they will be less vulnerable to geopolitical shocks. Meaning that you’re more likely to keep your products flowing throughout 2022.
Retail Challenge 2 – The neverending pandemic
The UK has had a largely successful vaccination programme, which might lead you to think we’d all be cosying up next to each other for a few celebratory post-work pints on Christmas Eve.
However, the emergence of new variants of Covid-19 and a fair amount of covid-fatigue in the UK populace is leading to an enormous spike in cases.
This time there are no government financial supports to counter the downturn many will have experienced as consumers played it safe by shopping online.
There’s little any individual retailer can do to counter a global pandemic but we still have a role in enforcing sensible social distancing, maintaining hygiene in-store and taking precautions with PPE to make our in-store experience a safe and welcoming space.
If you’re not doing so already, you must start selling online. Your competitors are doing it, and your customers are expecting it.
We’d also recommend that every retailer joins their local chamber of commerce and a retail representative body (such as The British Retail Consortium or a similar regional body). These organisations are excellent sources of the latest advice and they play a vital role in representing your views to policymakers.
Retail Challenge 3 – Minimum wage increases
In the Autumn of 2021, the UK Government announced it would again increase the national living wage (which is the minimum hourly rate you can pay to employees over 23 years of age). The new rate of £9.50 per hour represents an increase of 6.2% or 59p per hour in real terms and comes into effect from April 2022.
This is a substantial increase and comes on top of other increases in National Insurance and tax. Together the changes have gone down like a lead balloon with retailers across the UK.
While the rate increase seems small at first, the knock-on effect will be to increase wages and wage-related costs across the board for retailers. Senior colleagues who might be on a higher rate will understandably expect a boost in their earnings to maintain the differential between their earnings and less experienced team members.
Narinder Randhawa, President of the Federation of Independent Retailers said, “We would all like to pay our staff more, but the headline increase in the wage rate does not include the increase in National Insurance and pension contributions that employers also have to pay.”
“At a time when small businesses need help and support more than ever, this move by the government feels like a kick in the teeth for those that are already struggling to survive.”
Retail Challenge 4 – Single-channel selling
The Covid-19 pandemic changed life in the UK in 2020 and 2021 and the retail sector is one of the most significantly affected by these changes. While the move for most of the retail sector was always towards digital, the pandemic has massively accelerated this change.
According to research by Retail Economics, online clothing sales will take over physical sales in 2022 – three years earlier than previously predicted.
Some shoppers have been resistant to e-commerce, preferring the ability to try on clothes, fuss-free returns and personal service of visiting their local retailer, but lockdowns have changed that. Late adopters of online shopping became advocates overnight.
E-commerce sales soared by a massive 19% in 2020, and have continued to grow in 2021.
Retailers who are continuing to ignore e-commerce are missing out on a major opportunity to reach new customers, broaden their catchment area and future-proof their business.
Launching an e-commerce business was once a costly and difficult process but thanks to platforms like Shopify, creating your e-comm store is straightforward and affordable.
Additionally, your favourite retail software package (AirPOS of course) integrates seamlessly with Shopify and the integration is free of charge for AirPOS subscribers (just £40 per month).
Not only is it easy to sell online and in-store, but you’ll also see every single stock movement on one dashboard, giving you better planning and better visibility of your business. No more need for spreadsheets or notepads!
Retail Challenge 5 – Challenges from major online retailers
The ability of large e-commerce companies such as Amazon to offer free 1 day or even same-day delivery, is highly attractive to online shoppers who want everything, everywhere, faster.
But how can independent retailers compete?
First, depending on your product type (and size), next-day delivery isn’t as expensive as you might think. DHL offers competitive rates for next-day service and you can pass on these costs to your customers. Most customers will understand that next-day delivery is a premium service so will expect to pay something to get their goods earlier.
Offering anything free is a fantastic incentive, but if you are going to do this you’ll want to ensure you’re getting maximum value. Consider increasing costs across your store slightly to add profitability back in to pay for this service.
Many e-commerce brands understand that email marketing is one of the highest converting digital marketing channels (and one of the cheapest to run). The value of an engaged email list is huge and more than pays back the investment of offering free shipping in return for subscribing to your list.
Retail Challenge 6 – Staff shortages
The success of most independent retailers depends heavily on the quality of their shop floor teams. A good salesperson or a good team can change the future of your business, but since the pandemic hit, recruiting talented retail staff has been even more difficult.
Throw in absences from the surging omicron variant and it’s another perfect storm and we’ve already seen many businesses closing their doors simply due to a lack of available staff.
Additionally, a huge swathe of retail and hospitality workers have chosen to retrain or exit their industry rather than face going back to public-facing roles.
Some tips to combat staff shortages in 2022
Use better technology to reduce the workload on your shop floor. Start with a good EPOS system which makes checkout a breeze and means your staff can spend more time helping customers and less time trying to get the receipt printer to work.
Use social media marketing to not only market your business to customers but also to potential employees. Your Facebook page is very likely the first port of call for any applicant considering sending their CV to you. Does your shop look like a fun place to work? Does your team look happy to be there? (PS, social media is a great tool to get people on your e-commerce site!)
Feature your long-serving staff on your social channels and your website as a way of demonstrating how your business can offer applicants a career, not just a job.
Focus on finding people with the right attitude. Skills and experience can be taught but a good work ethos and an approachable manner are more valuable. This will require more from you as a retailer but is worth it in the long run.
Refer a friend – most of your retail team will have worked in other shops before yours and will know good people from previous roles. Consider investing in a cash bonus scheme for referring good people to fill your current positions.
The cost of this will usually repay itself from money saved from advertising the job or using a recruitment service. Referred employees are also more likely to join your team and stay for longer if they have a strong recommendation from a friend who currently works for you.
Conclusion
The coming year is going to be tough but there are plenty of signs to say that it isn’t all doom and gloom. Retailers who succeed in 2022 will do so by trying new things, fully embracing technology and doubling down on their investment in people and personal relationships.
At AirPOS we want to help every retailer embrace technology and step into the multichannel future. Start a free trial today.
