Inflation will add £18 billion to UK non-food retail sales in 2023

The Ecommerce Delivery Benchmark Report 2023, commissioned by Metapack's operating company, Auctane, in collaboration with economics consultancy, Retail Economics, surveyed over 730 retail businesses across all eight international markets. The survey discovered that 80% of the retail businesses were deliberating on increasing the price of their products, while 40% of these retail businesses claim the increase in costs of these products will be a major challenge in 2023.

Cost pressures and shifting shopping habits

The rising and operating costs is posing difficulty for the retail brands, as it mounts pressure on them. This, will in turn, affect customers as many individuals are prudent in spending.

According to the conducted survey, about 66% of the UK consumers spoke about how inflation is a major challenge, leading to 74% of the consumers planning to change the way they purchase. The survey further disclosed that 34% also mentioned that they would only buy things that are needed and 29% have the intentions to minimise or delay spending.

In addition, the survey reveals that due to the fact that the consumers have decided to cut back spending and take on spending wisely, the UK retail sales volume - units of products sold - are set to drop to 4.9% this year, compared to 2022.

Furthermore, the retail inflation is set to reach 7.5% over the coming years as shoppers are receiving less compared to the amount they are paying.

Retailer expectations

Across eight international markets, the research underlines that inflation is likely to add nearly £260 billion to retail sales. However, many retailers continue to be optimistic, rather than being negative on the effect of the economy. They have chosen to look at the bright side of the trading prospects in 2023.

Among the small enterprise retailers surveyed, 80% predict that the order volumes will be higher - 59% in 2023 - or the same, with one-third of them expecting that the order volumes will be higher by 10% or even more.

The General Manager at Metapack, Andrew Norman, said reducing cost of products will be a major concern in 2023 for both consumers and retailers, adding that, "as our research highlights, everybody will be looking to get the most bang for their buck from operating costs to delivery costs and product costs."

He noted the retailers who are able to give the most value when it comes to having a resilient carrier infrastructure; offering a better choice of delivery options, among others, will be able to survive.

Norman added their research reveals shoppers' priorities shift towards value, consumers would rather wait longer for delivery, or compromise on delivery location, rather than cost.

Delivery priorities: cost over convenience

Furthermore, the research also revealed almost 30% of UK consumers reported they would happily switch to parcel lockers or click and collect Buy Online Pick Up In Store (BOPIS) services for their online orders.

The General Manager at ShipStation, Mike Hayers, said 2023 is going to be a difficult one for the e-commerce industry, as the backdrop in the economy is predicted to have an effect on consumer buying behaviours and merchant operations, according to their research.

Hayers believe that winners often emerges during difficult times and he expects the same to happen this year.

He said, "We believe omnichannel retail and delivery will become increasingly important as consumers switch between online and offline as they look for the best deals.

"Merchants who continue to invest and adapt in technology to suit the changing needs of their customers are the most likely to drive loyalty and do well."

Sustainability and second-hand

Sustainability, according to the research, remains a heavy thought for shoppers, as 79% mentioned they would contemplate other delivery options when ordering online, like the green delivery options.

The research further revealed that 38% of the shoppers, however, are more inclined to go with longer delivery times, while 35% of consumers are able to transition to out of home collection, instead of spending extra to offset emissions and 7% are considering the latter.

The views of consumers on "second hand" products are interestingly changing and the response of retailers to the increasing demand of consumers to substitutes for purchasing new products is sustainable.

About one-quarter of consumers intend to purchase second hand or adopt online resale marketplaces frequently in years to come, according to research. As a result, there will be about 40% increase among consumers that will probably change their attitude, responding to economic pressures. Therefore, the cost of living worries may unintentionally hasten the change to "a circular economy."

Category and channel shifts

There is a gap across different income groups, thereby causing luxury brands to leave behind the mid-tier retailers. The research, even for the wealthy, spots that 61% still plan to limit discretionary spending in the coming years.

While 35% of UK consumers have the intent to move to less expensive brands when it comes to purchasing fashion items, further research shows that 43% will minimise purchasing furniture and homeware and 32% saying they will seek electrical items of cheaper alternatives.

Regarding health and beauty products, one out of three UK consumers plan to continue the normal spending. This percentage is more than any other sector, with 14% choosing to trade down, instead of buying less often.

According to the research indicated, a net proportion of consumers plan to shop more online than they did last year, across all non-food sectors. Furthermore, it revealed that as consumers look for value, they may begin to doubt channels, by frequently switching between online and physical to get the best deals. A hybrid retail future that combines the best of both online and physical may be in view.

The Chief Executive Officer of Retail Economics, Richard Lim said, "Retailers will continue to face a toxic mix of pressures this year as rising input and operating costs collide against a backdrop of weaker consumer demand, rising interest rates and shifting consumer behaviours."

Lim further added, "These conditions favour those retailers who have strong balance sheets who can invest heavily in price, leverage data to target their most valued customers and win new ones, while efficiently utilising stores to provide a truly omnichannel proposition.

"Those that carry high levels of debt, have weak pricing power and sit in the middle of the market could find life very difficult."