Cost pressures hit retailers hard

Inflation and energy bills are causing chaos

INFLATION is at its highest level for a generation, costs are rising across the board and many retailers and customers alike are suffering the consequences of escalating financial pressure.

Rising energy costs; rocketing petrol and diesel prices; and Brexit, with its consequent border complexity and staff shortages, are all fuel for an inflationary fire that is burning through household budgets in many deprived – and not so deprived – communities across Scotland.

These are not ideal market conditions for many convenience stores, but Scotland’s retailers are taking action – even if that involves some difficult choices.

Saleem Sadiq Spar Renfrew

• Saleem Sadiq, of Spar Renfrew, warned that rising energy bills could force him to make tough decisions in his store.

“We’ve not long come out of our own electricity contract and when we did, the prices had nearly doubled.

“There was no one to talk to about this or even negotiate a better price so straight away we felt a massive hit from the rising energy prices.

“There’s little we can do about this too, we’ve been implementing energy saving solutions for years now, including LED bulbs across the store, so we’ve been looking for other ways to keep energy usage down.

“As a result, we’re now considering removing things from our store, like our food-to-go counter, we have equipment running for that from the start of the day right through the end when we close the store.

“Obviously that has a big impact on bills so now we’re looking at whether we’d save more money keeping it going or turning it off completely,” he said.

Saleem’s dilemma will be familiar to both retailers and customers across the country. In April, market regulator Ofgem raised the energy price cap for households, resulting in a £693 annual increase for consumers on default direct debit tariffs. Those households on prepay plans have been subjected to an increase of £708.

Household bills could soar even higher in the autumn, as a further energy price cap rise is still on the cards – lumping retailers with more costs while also squeezing household budgets, limiting discretionary spending in the process.

Mo Razzaq Premier Mo’s

• In that context, margin will be crucial, but here too, some retailers are seeing a shift. Mo Razzaq, of Premier Mo’s in Blantyre, said he now has to consider raising prices to avoid losing money, although he is aware this move could see customers flock to local competitors.

He said: “PMP margins have been a real squeeze for us lately, the costs from the manufacturer just keeps going up and trying to afford them means we lose out on more money finding a better-for-value option for our customers.

“Margins overall have had a massive push but particularly on tobacco so it’s now looking at how we can keep prices sustainable.

“We’re looking at every invoice now to check product prices and seeing just how much they’ve went up by to try and make sure we don’t lose out on too much money here. We’ve already had to start paying out of our own pocket as well to try and cover some of these costs.

“There is a constant debate on whether we hike up our own prices to cover the new costs or whether we take the hit and remain more affordable, so we don’t lose out on customers.”

Faraz Iqbal Premier Linktown Local

• Across the country in Kirkcaldy, Faraz Iqbal has lifted some prices at his Premier Linktown Local store, but the Fife retailer seems to have struck the right balance.
Faraz hasn’t just lifted prices though, he’s also adapted his range to ensure customers in his community, who are facing their own cost pressures, still have access to affordable options.

He said: “Price margins have been good for us at the moment, but we did have to move our price points up slightly to make sure we didn’t fall behind.

“This has created more pressure on us to try and stay competitive of course and customers have noticed the changes too, but we have to make sure the store can still continue to run and doesn’t lose too much money.

“To try and help balance this though, we have been looking into more cheaper lines, especially with more own brand products, they’ll play an important part going forward to try and help save money for both us and our customers.

“With products in particular, we will look at the value margins and if we notice that it’s starting to make less then we won’t sell it and look for a cheaper alternative to replace it with.”

Natalie Lightfoot Londis Solo Convenience

• The financial pressures faced by many customers is something that Baillieston retailer Natalie Lightfoot is well aware of. Customers visiting Natalie’s Londis Solo Junction store have been sharing their concerns. Many of those on prepay energy plans in particular are increasingly struggling with the cost of heating their homes.

Natalie said: “Customers have been really concerned about this going forward and the one thing that they keep telling me is that they just can’t keep up with the new prices.
“I see them coming in for pre-pay electricity and there is this look of desperation in their eyes and it’s just horrible to see, you can tell just how worried they are about keeping their lights and everything else going.

“There’s a different responsibility as a shopkeeper where I’m thinking about keeping people paid and ensuring we’ve got a good stock in but for them, it’s about keeping the light on in the fridge and making sure they can afford to feed their children.

“It’s horrible, we’re just watching people plunging into poverty right in front of our eyes.”
Ever the community minded retailer, Natalie continues to support locals suffering under increased financial pressure, both through her store’s competitive pricing, and its relationship with poverty and hunger charity the Trussell Trust and other groups.

She said: “We’ve always made sure to support our local customers, we’re in a very price conscious area so we don’t do the more old-school convenience approach with longer hours meaning higher prices.

“That’s always been our approach and will continue to be for as long as we can do so, I won’t stock something if the price is too high because the customers just can’t afford it.
“We will also continue doing our drop off point for local food banks, including one for the Trussell Trust and helping out with the local community so we can help make sure that people still get the basic necessities.”