Keeping up with inflationary pressures and fluctuating consumer habits


Manhattan Associates comments on how retailers can adapt against a backdrop of instability.

The cost-of-living crisis, amplified by inflation and higher interest rates, has provided a difficult environment for both retailers and consumers alike in the UK.

Where consumers have been put at the mercy of grocery inflation, a shift towards more affordable frozen foods has occurred, while retailers have struggled to maintain profit margins as wholesale costs for many staple good have soared and consumer behaviour has become fluid.  
The ONS recently reported that 65% of adults in Great Britain are spending less on non-essentials, while 42% of adults are spending less on food shopping and essentials. Now, as grocery inflation begins to (albeit) slowly stabilise, retailers are left occupying a landscape that it not only far more unpredictable, but requires far more agility to navigate successfully – embracing agility will be the key to ensuring their survival.  

1 - Embrace Technology 

The fallout from the pandemic pushed billions of consumers into a more digital world and economic pressures on consumer purses have seen shopping habits upended still further. 
“With 83% of retailers now claiming they operate a level of interconnection between their online and in-store functions, the crucial task ahead, certainly in the short-term, will be finding new ways for physical and online presences to coexist and complement each other,” commented Craig Summers, Managing Director UKI at Manhattan Associates. 
“As the retail industry braces for the second half of what has already been an unpredictable year, the ability to navigate disruption, while aligning the physical and digital customer experience will become increasingly important. The technologies that allow retailers to fulfil in-store and online orders in an agile, sustainable and profitable fashion will no longer be seen as a ‘nice to have’, but rather as a table stakes,” Summers continued. 

2 - Celebrate Sustainable Shoppers  

51% of consumers surveyed in Manhattan’s recent research reported that environmental considerations are a top priority when choosing where and with whom to shop.  
Whereas brick-and-mortar spaces were largely seen as liabilities over the last decade, the perception of the physical store has been fundamentally changed. Today’s retailers are revaluating the role of their stores, recognising their added value as strategic hubs for online sales, not least as fulfilment hubs for click & collect, returns, delivery options and more. 

3 - Put Customers First 

Brand loyalty is the lifeblood of every business in the retail sector. Today the pressure of inflation is putting traditional bonds of loyalty under increased pressure as grocery inflation (in particular) is likely to cause consumers to change their regular choices, in favour of lower prices.  
“Supermarkets and retailers must reassess their traditional supply and demand processes, to ensure customers are absolutely put first. Where some grocers have focused their attention on increasing loyalty schemes, taking a more strategic approach to supply chain optimisation will enable both retailer and consumer to save precious costs,” added Martin Lockwood, Senior Director at Manhattan Associates.  
“By optimising supply chain processes and driving efficiencies retailers will also be able to pass on the savings of operational efficiency to the public. While retailers certainly can’t be expected to mitigate and manage every upstream, wholesale challenge, they can ensure that both physical and digital stores are equipped with the tools to keep up with fluctuating economic conditions and buying behaviour of strapped customers. Overall, the more efficient and unified a business’ processes are, the lesser the impact on the consumer wallet will be,” finished Lockwood.

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