It’s been a challenging few years for retail businesses, with 2021 handing those in the sector more than a few surprises.
In the wake of Brexit, a chaotic supply chain, a yo-yoing furlough scheme, and a country trying to bounce back from the pandemic, it’s been difficult to predict what twists and turns retailers should plan for next.
Businesses on the high street, including the ones on our doorstep in Sittingbourne and the wider Kent area, could do with some certainty – and the knowledge they need to confidently face what’s coming next.
So, what challenges can retail businesses expect to encounter in 2022? Here’s our best estimate.
Move to online rather than high street shopping
Let’s start with the big one.
During the pandemic and the various UK-wide lockdowns, consumer habits moved overwhelmingly towards online shopping – forced, in part, by the mandatory closure of non-essential businesses.
Footfall on the average English high street fell by a staggering 89.9%, which, according to the High Streets Taskforce, equated to approximately 10 million fewer people on the streets of a typical regional city.
While things started looking up when non-essential retail opened back up in April 2021, with footfall jumping by 112.9%, stats are still down overall, year on year.
Though vastly exacerbated by the pandemic, the move to online shopping is nothing new. According to the Centre for Retail Research, the UK has seen online shopping boom more quickly than any other country – at the expense of physical stores.
With that in mind, retailers would be savvy to consider what options they have to branch out into the online space, or risk being left behind.
Business rates and inflation
Chancellor Rishi Sunak’s reforms to business rates in England, as spelled out in Autumn Budget 2021, seemed like good news for retail businesses here in Kent when they were announced.
The Chancellor promised to freeze business rate multipliers, rather than see them rise with inflation, and to temporarily cut business rates by 50% (up to a maximum of £110,000 per business) from 1 April 2022.
The measures were widely considered an attempt to allow sectors that had been hardest hit over the past few years – like retail, hospitality and leisure firms – a chance to recover.
But, while the reforms still stand, the rapidly rising rate of inflation could mean that any tangible savings are swallowed up by soaring energy bills and rising rents for those retailers with bricks-and-mortar shops.
In Kent specifically, the rent for prime business park retail units has reached a new historic high of £250 per metre square. On the other hand, rent in the average prime ‘Zone A’ high street location has fallen by 15% in the last 12 months – so it all comes down to location.
Either way, after energy regulator Ofgem’s 54% increase to the price cap, retailers might not see much impact at all.
Protecting customers from the increased cost of living
It’s not just their own energy bills that retailers need to consider along with rocketing inflation in 2022 – but the cost at which they price their products and the impact that has on their customer base, too.
Anti-poverty campaigners have recently called attention to the fact that inflation disproportionately affects the ‘poorest’ shoppers – or those who are most likely to make use of supermarket value or own-brand ranges.
After investigation, research found that a basket of products, as highlighted by prominent anti-poverty campaigner Jack Monroe, was 56% higher than a year ago.
Charged with the responsibility of preventing inflation hitting the most vulnerable shoppers, lots of retailers are under pressure to freeze prices or increase the availability of their value ranges to help customers’ tightening budgets stretch further.
What retailers can do to prepare
While 2022 will undoubtedly hold its own set of challenges compared to previous years, it’s not all bad news. Thinking ahead and planning as much as possible for any situation – from freezing prices to making the move online – will help retail businesses in Kent face what the year has to bring.
An important part of planning carefully and proactively is to seek expert help and proper financial advice. We work with retailers up and down the country and are always on hand to share our thoughts and answer your questions. Get in touch today to speak to one of our team.