The UK is facing a growing cost-of-living crisis driven by rocketing energy prices, rising inflation and the National Insurance hike that comes into play in April.
Food bills have been rising for over recent months with Tesco chairman John Allan warning that the worst is “yet to come” as prices could surge 5% by the spring.
Yesterday, business secretary Kwasi Kwarteng admitted that households are facing a ‘very difficult time’ amid these rising costs and soaring inflation.
Some retailers will struggle as cash-strapped shoppers cut back and trade down, however, others will find conditions ripe for growth.
While it would be obvious to name all the big discount retailers, Retail Gazette digs a little deeper to uncover retailers that will thrive in the year ahead.
With budgets squeezed some Brits will opt for a staycation this year instead of heading abroad for their holiday.
Since the pandemic began, we have seen the rise of the staycation with prices of camper vans going through the roof as Brits looked for other ways to take a break while foreign travel has been restricted.
This looks set to continue and retailers specialising in selling outdoors equipment for activities such as hiking, camping and more could be a popular choice for shoppers.
Mountain Warehouse’s offer of affordable outdoor clothing and equipment make it an obvious choice for those looking for a thriftier vacation.
Typically downturns are associated with cutting back on discretionary purchases and focusing instead on everyday staples and essentials.
Historically, however, sales of beauty products tend to buck this trend. Known as the lipstick effect, sales of make-up thrive during recessionary times as female shoppers snap up relatively low cost, items to make them feel good.
Superdrug, which offers a range of products fit for a pamper evening at home, should receive a sales filip during this time.
The return of office working, and a pick up in events and socialising as people get used to living with Covid should also help beauty sales to propser.
Aldi and Lidl
It’s no surprise that Aldi and Lidl have made this list as the kings of discount retail in not just the UK but wider Europe.
The pair have had a difficult pandemic as shoppers flocked online, where the discounters do not sell food, and avoided shopping in smaller stores that they perceived to be busy.
However, now normality has started to resume and inflation starts to bite, shoppers have returned back to Aldi and Lidl.
In the latest Kantar figures for the 12 weeks to 23 January, both of the discounters’ sales and market share grew for the first time since June last year.
Lidl was the fastest growing physical retailer with sales up 1.2%, which increased its market share 0.3 percentage points to 6.2%, while Aldi’s sales were up 1.1% helping its share grow by 0.4 percentage points to 7.8%.
This should be a sign of things to come as shoppers put price at the top of their shopping list in the current inflationary environment.
And they have good reason to flock to Aldi and Lidl. Despite various price matches across the big four, consumer watchdog Which? found the pair to be the cheapest UK supermarkets, with Aldi narrowly beating Lidl to the title of the cheapest last year.
Which? tracked thousands of grocery prices over 2021 from bread and butter to fruit and veg, and found Aldi offered the best value for money in six out of 12 months last year, with Lidl the cheapest over five months.
With food prices set to increase across the board this year, both are an obvious choice for those looking to fill up their shopping trollies for less.
Marks & Spencer
While some might be surprised to find M&S on the list, shoppers who are cutting back on eating out may well visit the upmarket grocer for a treat while dining in.
Marks & Spencer’s infamous meal deals are popular for a reason and offer premium dining experiences from your own home without breaking the bank.
With Valentines Day quickly approaching M&S’ Dine In promotion, which includes a starter, a main, a side, a dessert and a bottle of fizz or wine or a box of chocolates, all for £20, will undoubtedly drive sales as many choose to ditch the restaurant reservations this year.
Meal deals aside, the retailer has been working hard to reinforce its value credentials over the past couple of years with its ‘Remarksable value’ campaign, which reinforces both the quality of its products and everyday low price.
The campaign has been a success and the value perception of M&S Food is at its highest in four years
The retailer will expand the ‘Remarksable value’ campaign to its home offer this month, pushing its keen entry price points such as £1 for a pure cotton face town and £6 for a bath sheet, and a three-piece aluminium non-stick pan set for £20.
High quality items at a low price are likely to resonate for customers that are looking for products that last in this environment.
UK house prices reached a record high in January according to Halifax, which said that affordability now remains at historically low levels.
This may lead many people to stay put rather than move home right now, and some will be looking to improve their current houses instead.
The thriftiest will be looking to take on home improvement projects themselves so expect DIY market leader B&Q to thrive in this environment.