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What can retailers do to weather the storm of rising costs and consumer nervousness?

by uma


By Ashleigh Hulse, Sales & Marketing Assistant at Adventa

Due to record-high inflation rates, rising energy and transportation costs, and decreased consumer spending, businesses are struggling to find the light at the end of the tunnel, with many already shut their doors. 

Unfortunately, smaller businesses are suffering more from this crisis than larger ones; according to the Federation of Small Businesses (FSB), 53% of companies anticipate stagnation, contraction, or closure in the coming year.

In these uncertain times, it can be quite difficult to find a way to weather the storm. Here, we discuss how the rising cost of living is impacting retailers and how they might be able to weather the storm.

How are retailers affected by the cost of living crisis in the UK?

The cost of living is affecting not only retailers but consumers too. This, in turn, is having a negative impact on said retailers. 


Both income and salaries are rising, but inflation has been accelerating more quickly than either. This indicates that income growth is stagnating since wages and income levels are decreasing at a rate that keeps pace with inflation.

This results in decreased real income for consumers, who are then less likely to spend money on expensive household products like televisions or fitness equipment as well as specific goods and services like apparel. According to the Office for National Statistics, sales volumes decreased by 0.2% in June before increasing by 0.3% in July. This gain is mostly attributable to sales promotions.

Energy costs

The rising cost of energy, which is brought on by rising wholesale prices for gas and electricity, is another factor that is having an impact on retailers. The FSB anticipated that between February 2021 and August 2022, electricity costs would grow by 349%, and gas costs would increase by 424%. 

Despite doing all in their power to reduce energy costs, many retailers have reached a point where there is little more they can do. Additionally, retailers cannot pass these costs on to consumers due to decreased spending by consumers, who are also dealing with the dilemma of rising energy prices. Retailers will see a decline in profits as a result.

Transport costs 

Increasing transportation costs are a result of rising energy prices as well. According to research, gasoline prices have nearly doubled since May 2020. This problem existed before Russia invaded Ukraine, but it has been made worse by the conflict and the sanctions that followed it. 

Further proof from Logistics UK bolsters the points mentioned above. According to their study, 71% of UK logistics firms highlighted that rising fuel prices and other constraints on the global supply chain are raising the cost of transportation. With 35% of respondents reporting a decline in sales or orders, this, together with the general increase in living expenses, negatively impacts business.

How can retailers survive the doldrums that are expected to come later in the year? 

In light of those mentioned above, retailers must consider how they might combat the problems of declining consumer demand and rising expenses. It should be emphasised that high inventory levels accompany low customer demand. Therefore, retailers will need to alter their purchasing plans to meet the shifting market. 

Retailers might also concentrate on buying inexpensive goods and getting a good deal, such as with private retail brands. In addition, by buying smaller quantities of each product, retailers can consider maintaining lower inventory levels.

Alternatively, they can try to develop a dropshipping partnership with a different manufacturer. Dropshipping is a retail business strategy where the retailer buys inventory from a wholesaler or manufacturer only when it is actually needed (i.e. when a consumer requests something). However, e-commerce retailers benefit from this the most. Some wholesalers and manufacturers provide a variety of goods that may all be customised to match your needs, from seasonal items to office decor items. 

Lastly, businesses should concentrate on building a local presence because many customers prefer to shop locally or with low shipping charges (a result of the increased transportation costs).

Ready to weather the storm? 

Due to increased inflation, rising energy and transportation costs, and diminishing real income, the cost of living is becoming far too costly, which in turn affects consumer spending. All of this is critically hurting businesses, especially smaller ones with fewer financial resources as assets. It can adjust to weather the storm, much like large corporations can. 

The good news is that there are things that stores can do, such as dropshipping and reducing stock holding levels, to help them weather this economic downturn. In addition, they can excel at delivering quick, customised products. 


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