The cost of living crisis has been well documented over recent months, with a particular focus on individual-level impacts in most cases. But more recently, business-level impacts have begun to be explored and also reported. In recent weeks, the realisation of the knock-on effects of poor consumer well-being on businesses has catalysed dramatic change in how retailers are approaching the cost of living crisis. Traditionally, direct concerns of retailers revolved around growth and profit. Now that the impacts of the cost of living crisis on the individual are also impacting businesses as a result, the well-being of customers from the perspective of financial security, is also becoming a direct concern of retailers.

 

Are we seeing a change in the way things are priced?

In an unprecedented move last month, mega beauty chain Superdrug appointed a ‘Cost of Living Ambassador’. Chloe Carmichael, a deals expert with her own ‘Chloe’s Deal Club’ community of over 60,000 subscribers, has taken on the role to guide the business in the areas of value and accessibility. Her role will commence in September of 2023. In many ways, everyday low pricing (or EDLP) is becoming more common and more of an expectation by consumers across industries. Walmart is a leader in this space, having adopted EDLP as their main pricing strategy over the more typical approach adopted by retailers of promoting discounted sales from full-priced items.

Research would seem to suggest that consumers prefer retailers that not only offer cheaper alternatives than their competitors, but that also provide consistency and dependability in their pricing. The high fluctuations in price when retailers adopt the discount strategy over EDLP is less attractive to consumers, and less dependable to them when they really rely on consistent pricing. Grocery has been historically competitive in the EDLP space in the UK, but now, like Walmart and Superdrug, more and more retailers are joining suit. But is it out of goodwill or necessity?

 

We are paying for things differently now

Another recent surge that appears not to be slowing down is the buy now, pay later method (BNPL) of shopping. Many large retailers are now offering this to customers as a way of staggering payments to make them more manageable and affordable. But there is a darker side to BNPL. This side involves the poor credit cycles that consumers can find themselves trapped in, with increasing numbers of bills to pay and keep track of, and of course, the interest that is accrued after the agreed period. So is this method helpful to consumers in the cost of living crisis, or does it snowball the negative impacts to cause further detriment to both individual and business well-being in the long term?

When pondering the lines of responsibility of retailers for consumers in the cost of living crisis, a useful analogy can be the consideration of the balance of predator and prey in nature. Typically, the predator doesn’t care much about the well-being of its prey, considering the environment is in balance. But as soon as this balance shifts, nature shifts to accommodate the need to foster growth within the prey community. The same is broadly true when comparing retailers (predators) to consumers (prey). Gone are the days of economic balance and stability.

 

Final Thoughts

We are operating in a period of uncertainty, characterised by the demise of the consumer in terms of their buying power. What is needed is a rebalance, a shift of strategy, and an understanding by retailers that their own survival is directly dependent upon that of their consumers. With this comes a certainty that those retailers (such as Superdrug) adopting considered and rebalancing approaches to their decision-making will weather the storm far more effectively than those that do not.

 

Further reading

We’ve featured guest speakers on our podcast that have spoken in more detail about EDLP and BNPL. You’ll find links to the episode and the transcripts right here on our website. If you’d like to explore the rest of the podcast and discover even more insight, you can visit the podcast website too.