Opinion: It’s tough for retailers in the current environment

Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), explains that as retailers face increasing pressure from all angles, the importance of remaining agile is as relevant now as it ever was.

It should come as no surprise to anyone that the current economic environment in Australia is under immense pressure from all angles. For retailers, the cost of doing business is greater than ever.

Insurance costs are up, energy costs are up, increased labour costs, cost of goods you are purchasing has risen sharply with continued pressure for further increases to come, illicit markets continue to rob sales from the tobacco category, IT costs are up, the threat of cyber threats and scams continues to grow, new Industrial Relations Laws have the potential to cause future issues, and the list just goes on.

This has seen consumer prices increase quickly, resulting in consumer sentiment and spending decreasing, resulting in a very challenging sales environment. For consumers, the cost-of-living increases has resulted in the majority of Australian’s being forced to make different choices in their spending behaviour to ensure that they can meet all their commitments.

For Australians with a mortgage on a fixed rate, life might be being managed in the same way and others might be accounting for increased mortgage costs once they come off that arrangement in the next 6-9 months. For mortgage holders already feeling the brunt of 12 rate increases, these consumers have been forced to make changes to their lifestyles or are depleting their savings accounts.

While inflation appears to be on a downward trend and interest rates have been on pause for the last two months, the pain that lies ahead for consumers can’t be underestimated.

In this environment, consumers are looking for value driven offers to save whatever they can, whenever they can, at every opportunity. In speaking to retailers regularly like I do, it has become apparent that the game plan needs to change to deliver on their customer expectations. This doesn’t mean they are reinventing the wheel; it just means that they are thinking differently.

The good retailers are focusing their energy within the growth categories of food for now, food for later, beverages, snacking, and confectionary. At the same time, operational excellence is a major focus across the board. Staff training to deliver the best customer experience has become an increased focus again, and this is playing a role in personal development to protect their existing staff from wanting to look for outside development areas with other companies.

Loyalty programs continue to be developed at a fast rate, aimed at achieving a personal relationship with their customers by allowing personalised promotional offers, targeted product suggestions, and exclusive product offers. Retailers’ promotional programs are being designed to offer value meals for breakfast and lunch, linking together key categories to better compete with other retailers that are all fighting for consumer spend.

The quick service restaurant (QSR) industry is playing the value game very well now. The battle for the consumer’s hunger is taking on a new dimension. We are seeing serious value driven offers and menus launched all with the aim of convincing the customer to shop with them. Twenty nuggets for $10, under $10 meal deals, $3 tacos, $3 burgers to name a few.

Convenience retailers are also getting involved with $2 pie days, $5 sandwich days, free coffee with fuel deals, 5th or 6th coffee free, as well as multi-pack beverage packs with everyday pricing, to be competitive with the major supermarkets. New and exciting products are also continuing to play a role in surprising and delighting the customer.

I urge all retailers to think about their customers, look at their surrounding competitive set, understand what the consumers are gravitating to, and then think about how you too can make changes to your in-store offering – be it range extensions or deletions, promotional offers, or meal deals.

Standing still won’t drive a different result, as the market moves, you need to move with it to remain relevant and meet your customers’ expectations during these challenging times.

This article was written by Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), for the August/September issue of Convenience and Impulse Retailing magazine.

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