Get beyond the VAT rise and focus on the retail essentials to succeed, says Angela Spindler
If I had a pound for every time I’ve been asked in the last few days what the impact of the VAT rise and cost price inflation will be on retailers, well, I’d have about £10 by now. According to some reports, that would only cover the impact on my household spending for one week.
But over the past six months or so this really has been the most frequently asked question in retail. Although I run a reasonably sized national retail chain I don’t have a good answer, and neither does anyone else.
We are entering unchartered waters.
I have decided to stop thinking too hard about it. Our business has bought sensibly for the season, priced carefully and reviewed all cost lines. We have left ourselves as much flexibility as possible. The stock is on its way, so all we can do now is see what happens and be ready to respond as the season unfolds.
The one thing I am sure of is that some retailers will do well and others will falter - but there’s nothing new there. I am also certain that retailers that understand their customers and what is important to them, and then stay relevant and focused, are more likely to weather any coming storm.
I can remember a time when the key discussion topic for retailers was how to engage with and delight customers and how to beat the competition in the race to win loyalty.
These days we spend much more time talking about the economy and the weather even though we can hardly influence either. It feels like it is time to change the record.
In our business, The Original Factory Shop, we’ve been working hard to understand how our customers feel about their spending, where they will be cutting back, how their shopping habits will change and what we can do to build their long-term loyalty.
The message is loud and clear; value for money is top of their agenda. Is it well made? Will it last? Will it wash well? Is it a brand I can trust? These questions will become more important as prices go up. One insight I can share is that cutting quality corners to keep prices a bit lower will not work this time; the increases are too steep and the consumers more savvy than ever.
Store location is also rising in importance for customers. A combination of harsh weather, escalating fuel prices and time-pressure has led to an increase in online shopping but people still like to visit stores.
The dynamics mentioned plus increased marketing by several small town retailers, such as Nisa, Co-op, and ourselves, has really led to an increased propensity to shop closer to home. If you visit your local shops and the experience is good, the range relevant and the value right, why would you shop anywhere else?
So, who knows how the challenging economy will impact retailers? Instead of attempting to predict this we are focusing on the things we can change, and emphasising the things that are important to our customers in our towns. With this backdrop we are cautiously optimistic.
Angela Spindler is chief executive of Original Factory Shop