Retail Outlook
Heading into 2025, UK retailers continue to experience margin squeeze with a mix of topline pressure and cost headwinds. The Autumn Budget has added to that burden with a trio of higher labour costs: national living wage, NIC contribution and Employment Rights Bill, which will disproportionately impact retail and hospitality sectors. Winning retailers will need to protect the core, unlock growth beyond that core and enhance their reputation.
Optimisation of the core business requires a focus on the basics – value, quality and convenience – to enhance the customer proposition and drive operational efficiencies. For some, that will mean serving the most valuable customer segments with a better range, pricing and experience. For others, it will be a focus on rebalancing marketing and sales channels, and managing supply chain risks and volatility. However, for all businesses, identifying and embedding cost-out to defend margin and fund new investments will be a priority.
But unlocking profitable growth is also likely to require finding new sources and opportunities. Those able to establish a pipeline of innovations will be able to create a reason for customers to buy (and buy again). That might be diversifying into new product markets, service offering or geographies to capture share of wallet. It also might be exploring vertical integration to capture profit pools across the value chain. Or it could be monetising new business models to create new profit streams or rebalancing corporate portfolios to double-down on differentiation.
Whatever that innovation looks like, it must be informed by deep consumer insights and data analytics. And in an effort to continually innovate, retailers will need to embrace the emerging technologies that promise to revolutionise the sector. Given the competing demands on technology spend, retailers need to explore how to design the right technology strategy to solve pain points for consumers and the business in a way that ensures a return on investment. For further details see: https://www.pwc.co.uk/industries/retail-consumer/insights/retail-outlook.html