It seems obvious now, that in the technological age we live in, energy was always going to be a pinch point, but the speed with which it has become a big, global issue is alarming – and its impact is one that no one has planned for. This is ably demonstrated by the UK’s self-professed ‘small state’ government intervening, not once but twice, to cap energy prices. To the tune of at least £150bn. The pandemic costs around £300bn.
But the big question is are these interventions going to help retail? The move last week to cap domestic power bills at an average of around £2500 per household is certainly likely to have averted an economic meltdown. However, consumers are really spooked. Research out this week suggests that some 80% of consumers still plan to hold back on non-essential spending, withholding some £1.5bn in spends, some of which would have been heading for retailers.
The research comes as three quarters (73.5%) of consumers feel the £2,500 price freeze on energy bills does not go far enough to support their personal finances, with 90.0% still planning to cut back spending on non-essentials.
Ahead of energy bills rising further from October, the Cost of Living Tracker shows that average families are already suffering double-digit declines in discretionary income – seeing falls of 10.0% in August compared with the same month last year, leaving them with £112 less per month to spend on non-essential items. Across the economy, this is likely to have wiped out around £3.3bn of cash available for discretionary purchases in August.
Many consumers fear for their employment as business, too, faces similarly rampant inflation and high energy bills. Government intervention yesterday (21 September 2022) to cap wholesale energy prices for non-domestic users at around half of what they market would be charging offers some relief, but again many are worrying that this is not going to be enough – certainly across the six months that the government has pledged its support.
The British Chambers of Commerce (BCC) for one is warning that many businesses will still struggle to meet their energy bills, even at the lower rate, as that discretionary consumer spending that has been pulled out of the market will see takings fall more significantly. Retailers may still be able to keep the lights on, but will anyone come?
In more positive news, there are many ways in which retail and wider industry are looking at innovative ways to beat the downturn. Sainsbury’s, for example, is opening a pop-up shop in Shoreditch in London that will be one giant walk in freezer, showing all the items that shoppers usually buy fresh, but which can also be frozen. They have, wittily, called it Sainsfreeze – and it deserves to succeed based on that alone – and it offers yet another insight into how the road ahead is going to radically reshape how we shop.
Alibaba, meanwhile, is extending and enhancing how it offers metaverse to luxury sellers, tapping into a growth in virtual shopping that has started to grip China and is, it believes, going to come to Europe. Similarly, European lifestyle brand, ELLE, is also creating some metaverse games and quests with blockchain game My Neighbor Alice. It too sees younger shoppers starting to shift to the virtual world.
This quest to tap into younger shoppers has also seen the Not On The High Street marketplace rebrand itself, with a new logo and a mission to showcase how indispensable it is – particularly to Gen Z, many of whom are starting to get anti-Amazon, because that is where their parents shop.
All together we live in interesting times – which as the Chinese proverb would have it, is a curse. Things are very uncertain, but from uncertainty comes change and, while we may wrestle with the cost of power, what is certain is that the electricity of innovation is set to flow through the retail industry.
One place to understand what may be in store is at the first ChannelX World, taking place on October 13 in London. The new event offers retailers, brands and marketplaces a timely chance to explore the vital new channels that customers today want to buy through – from marketplaces, to social media and, looking to the future, the metaverse.
Speakers hail from an array of brands including M&S, LK Bennett, Amazon, Debenhams, Boohoo, eBay, TikTok and many more. Click here to find out more and to register for the event.