European retailers worry about inflation and slow demand

Barcelona — Despite initial signs that price rises are slowing, retailers globally are still worried about inflation dampening consumer spending, according to a survey of retail decision-makers conducted by Boston Consulting.

In Europe retailers are contending with slowing sales as consumers, squeezed by high energy bills, spend less on clothes and buy cheaper food.

Overall the rising cost of goods, declining consumer spending and unpredictable supply chains were the top-ranked concerns for the 561 global retail executives, directors and managers surveyed by Boston Consulting for a report published on Tuesday as the World Retail Congress conference begins.

Passing higher costs on to shoppers is likely to become harder: 72% of respondents said they expected consumers to be even more price sensitive this year.

“This limits the options retailers have to recover and combat high input costs, and it creates new difficulties that retailers must combat, such as shifting consumer behaviour towards specific products and customer segments,” Boston Consulting said in the report.

When buying groceries, for example, consumers in Britain have been prioritising affordability over other qualities, with negative knock-on impacts on nutrition.

As well as hiking prices and renegotiating with suppliers, retailers are having to get creative to keep shoppers coming back, with many investing in loyalty programmes, price promotions and improvements to the online customer experience, the survey found.

The authors of the report said retailers should invest in artificial intelligence (AI) to hone their pricing and marketing strategies using algorithms and machine learning. “Most retailers outside Asia are neglecting AI and missing out on the potential additional benefits it offers,” they said.

Asia was a bright spot in terms of retailers’ expectations, with 76% of survey respondents expecting the region’s economy to grow this year after China’s reopening after lengthy Covid-19 lockdowns.

Retailers were more optimistic about North America than Europe, with 68% predicting growth in the former and 54% in the latter.

Reuters