Being any kind of retailer right now feels like being strapped to an RRP rocket. With political uncertainty and Covid supply challenges lighting the blue touch paper, record inflation and rising input costs have seen prices reach lunar altitude.
Take everyday items like butter and spreads. Prices have rocketed by over a fifth (20.4%) in the last 12 months [Kantar 52 we 19 Mar 23] alone. Multiply that effect over a whole basket and suddenly customers are scratching their heads wondering where their wages went while retailers see margins go up in smoke.
Britvic believes that basket spend will inevitably dip as customers look to cut back. “Consumers are looking to make their money stretch as far as possible for them, and as part of this, we expect to see smaller transactions and smaller pack sizes come into play,” says retail commercial director Ben Parker.
Nevertheless, he is confident that c-stores will weather the storm. “In times of economic stress, the convenience channel plays a key role and has always responded well.”
However, others have raised concerns over whether convenience stores will be deemed too expensive. C-store customers expect some kind of premium for local shopping. But the big worry for the sector is that convenience prices now look unrealistic compared to the discounters and online.
“While consumers generally accept a price difference in convenience, the current pressure on household budgets will undoubtedly be putting this under greater scrutiny,” says Ross Davison, head of convenience at Kepak (Foods Division).
“One in six are already shopping less in convenience stores in the last six months, with the number of those prepared to pay more for products versus in a supermarket falling [TWC]”.
Shoppers could well feel they’re seeing prices rise every other week. And it’s a feeling shared on the other side of the counter too.
“I’d say an extra hour of my week is now spent checking prices,” says Best One retailer Kay Patel. “Before you could let products arrive and not straight away have to check your margins. Now the price changes can be astronomical – 20p, 50p or more – and sometimes you’re losing out on margin. You’re constantly wondering what the next price change is going to be.”
Kay cites beer as an example. Alcohol is a category in which his store has plenty of local competition, so getting the price right is vital. He says that less than six months ago he was paying £18.99 for a case of big-name beer (albeit on promotion). Now the list price is more like £31.
“That’s not even in line with any inflation – it’s just ridiculous,” he says.
Meanwhile, in butter he’s now selling Lurpak for around 12% margin, a price that he says “really isn’t viable for me” but is necessary so packs don’t look too expensive on-shelf.