How independent retailers can offer customers value in the cost-of-living crisis

The golden quarter is the busiest time for independent fine food retailers, as consumers traditionally indulge and opt for higher quality food and drink to make their festive season special and impress party guests. 

But with inflation still in double figures, energy bills continuing to rise and government support still unclear, indies need to be prepared to mitigate extra costs this winter. 

As Emma Jones, founder of Enterprise Nation, explained, “Our latest Small Business Barometer found that owners are already keeping things together by working longer hours and taking less holidays. And it’s not a surprise that retail and food and drink businesses have been hit the hardest.

“Many are in their peak selling season, so the latest news about interest rate rises and the knock-on impact on consumer confidence, will hit hard.”

The energy crisis
Of course, as Simon Jones, co-owner of Forest Deli, explained, “The elephant in the room currently is what is going to happen to energy costs which is still unknown for all businesses. The outlines are all on the government website, but until this is officially confirmed we are all in the dark.

“As a cheese shop we can’t function without using a lot of electricity on chillers and fridges, and we need the lights on so there is not a lot we can do to reduce electricity costs.”

But for Rupert Denstone, chairman of the Farm Retail Assocation (FRA), making changes with your equipment could save precious pennies. “We’ve put a whole load of solar on here and that’s just been an absolute saving grace. I’m hearing people are updating equipment and putting curtains on the front of chillers so they’re more efficient.”

This is something that Andrew Goodacre, CEO of the British Independent Retail Association (Bira), also suggested. “Invest in low energy equipment (if possible) and sustainable energy supply. Everything from light bulbs to heat pump, from low energy fridges to solar panels. This may be longer term, but we have to plan for energy prices staying higher for some time yet.”

Dealing with inflation
Inflation, particularly food and non-alcoholic drink inflation, is at an all-time-high, and indies will likely need to adjust their prices to keep up with the increased costs.

According to Rupert, “Most retailers work on a margin they like to achieve but if you put that margin on top of what you’re buying things in at the moment it can put things so expensive that it will probably stop people buying them. It’s finding that balance between making things attractive to the customer but still ensuring your business is making a profit.”

Another idea according to Andrew, is to identify your so called ‘Known Value Items’. He explained, “One pricing strategy is to identify those products where the prices are more likely to be known by customers. These are staple goods, often bestselling. For supermarkets it is often the price of milk or bread. 

“Prices can increase here, but should be kept on the lower side as it is these products and prices that determine the consumer’s perception of value of the business as a whole. Keeping known value items better value allows you to increase margin the other products whilst still presenting value in the eyes of customers.”

Simon also suggested making efforts to reduce food waste. “We bake freshly made sausage rolls, quiches etc for lunchtime daily and we really want to minimise waste so we are encouraging customers to pre-order which they appreciate as well as it saves costs and removes waste.”

Communicating cost increases
However, the real problem is encouraging your customers to spend a bit more than they would at discounters, and it all comes down to education. 

As Rupert explained, “I think there’s a lot to be said about educating the customer on why things have gone up in price. If you do explain I think customers are more likely to buy something then, so there’s a bit of engagement needed there. The environment in delis, farm shops and food halls mean conversing with people over the counter and you’re able to talk about that for example the cost of beef going up because the cost of feed has gone up. 

“We need to make sure we have really good product knowledge and using that knowledge to engage with the customer. I think people like to discuss these issues with people on the counter, and if you educate them a bit, they don’t mind paying that little bit extra. 

He concluded, “I think at this time people are more likely to support local if you can communicate that in the right way. So, you’ve got to turn it into a positive story about why artisan is speciality, British, local, low food miles and talk about those buzz words that helps to justify the price to customers.”