Retailer Confidence Wanes in the Cost-of-Living Crisis

Global survey reveals retailer sentiment towards inflation, price perception and more

European retailers are certainly feeling the strain of the cost-of-living crisis. According to recent data, 74% of retailers in Europe said margin maintenance has been difficult to achieve in this inflationary period. And while fewer (55%) of retailers in North America said the same, retailer confidence everywhere has taken a hit from inflation.

For almost two years now, retailers have been battered on all sides by rising costs, changing consumer behaviours and increasing omnichannel demands. In a new survey conducted by Researchscape International and commissioned by Revionics, we explore where retailer sentiment currently stands on key pricing elements.

Read on for more findings from the survey and to learn where retailer confidence wanes or stands firm on price perception, inflation, promotions and more.

Price perception:

With soaring costs, plummeting consumer loyalty and hyper competition, price perception has been top of mind for many retailers around the world. Globally, less than half (43%) of retail pricing teams feel confident they have effectively managed their price perception in this inflationary market.

What’s more, 76% of retailers are concerned about consumers perceiving their pricing as unfair. When looking at Europe versus North America, the numbers hardly change. Examining the data by country, the percentage of retailers concerned about fair price perception dips to 68% in the U.K. and jumps to 85% in Germany.

Strategic priorities:

Protecting consumer price perception isn’t the only pricing focus retailers have found difficult in the cost-of-living crisis. When asked which strategic priorities have been harder to achieve during this time, 66% of all respondents said margin maintenance, followed by private label growth (49%), fair price perception (46%) and protecting cost structure (45%).

Diving deeper, retailers in Germany and the U.K. showed similarly high numbers for margin maintenance; however, French retailers came in just a little lower, at 62%. German retailers also showed a higher difficulty with protecting cost structure (51%), compared to 38% in France and 31% in the U.K. and other European markets.

By comparison, retailers in North America had more evenly distributed responses, with 55% saying private label growth has been difficult, while 50% felt challenged by fair price perception and 45% grappled with protecting cost structure. North American retailers also struggled more with expanding market share, with 36% of respondents selecting this answer compared to only 18% of respondents in Europe.

Promotions:

As a critical piece of any retail pricing strategy and a driving factor of consumer price perception, promotions should also be a top strategic priority for retailers right now. And yet 27% of retailers aren’t even sure whether their promotional strategies are effective.

This number does not vary much by country, with 27% of retailers in the U.S. unsure of their promotional effectiveness and only a slightly higher 32% of respondents in the U.K.

Perhaps it is this uncertainty that led to such a wide variety of promotional strategy shifts in response to inflation. Across all regions, retail pricing teams tried out a gambit of tactics, including shallower discounts (46%), steeper discounts (39%), more promotions (39%), fewer promotions (37%), more EDLP focus (22%) and more private label promotions (22%). While it’s fairly common for retailers to simply rely on the same promotional tactics as in previous years, such unprecedented economic conditions likely pushed many retailers to try several new strategies to save margins or match new consumer behaviours.

Disinflation:

The majority of retailers anticipate inflation will return to normal by the end of next year, with the largest number of North American retailers (53%) saying 2023 and the highest number of European retailers (47%) thinking 2024.

This slight difference in views is to be expected. While soaring costs started to show signs of slowing late last year in the U.S., most of the European region has yet to receive respite from the cost-of-living crisis.

Whenever disinflation does occur, retailers actually show higher levels of optimism about their ability to navigate it. Globally, 54% of retail pricing teams feel very prepared to handle disinflation, while only 37% feel less than prepared. German retailers appear to have an even more positive outlook, with only 15% of retailers in that market feeling unprepared.

Maybe retailers are now used to riding the waves of change, or perhaps it’s an expected return to some semblance of normalcy that provides this confidence boost in anticipation of disinflation.

Looking inward

Our survey didn’t just find differences from region to region. In fact, the data reveals an interesting dynamic within retail organisations as well.  

Results show there’s a disconnect between how pricing/merchandising teams and marketing teams view critical price perception and pricing strategies, potentially leading to divergent priorities and disjointed consumer pricing experiences.

Across the board, marketing teams feel more confident in the effectiveness of key pricing objectives, including the ability to prevent margin loss, response to cost increases and private label pricing strategies, than do pricing teams.

This disconnect isn’t only found at the tactical level, but at a broader strategic level as well. Eighty-two percent of marketing teams feel confident their pricing strategies are the best path for meeting organisational goals, while only 56% of pricing/merchandising teams share that sentiment.

Whether false optimism or siloed communications and data are to blame, this disconnect ultimately impacts a retailer’s ability to meet customer pricing demands.    

For a deeper look at this misalignment, including possible causes and solutions, download the free report Pricing’s New Disconnect. 

Research Methodology
The results in this report are from an online survey conducted by Researchscape International and commissioned by Revionics, an Aptos company. The survey was fielded from 10 September to 5 November 2022. There were 311 respondents to the survey. Respondents were from 11 different countries. The responses were not weighted.