Tough times for consumers as well as retailers

Each week now we are fed more bad news about the economic conditions and tales of woe in the High Street. This week the Observer has commented on warnings issued by Lord Harris of Carpetright fame, a very experienced and successful British retailer, who sees real problems for consumers as well as retailers with rising prices affecting the entire supply chain.

The Chancellor, Alistair Darling, has told the world that Britain needs to have restraint in wage demands in order that the Government's inflation target of 2% might be reached, yet we hear that the fuel drivers have settled at 14% in their claim. The Governor of the Bank of England has stated clearly that the country is heading into a period of rising inflation and hints that the Monetary Policy Committee is likely to recommend raising interest rates to compensate for the predicted 4% inflation.

Gordon Brown, the Prime Minister, is attending a summit called to discuss the high and rising global cost of oil. It is unlikely that he will be able to make much difference given the conflicting pressures and constraints that exist in the world markets and in individual producing countries, but it makes for a positive press that the PM is standing up for the country. The real problem is that these rising prices must impact upon all parts of the supply chain and will directly affect consumers with higher prices at the retail pumps, indirectly by the costs of transporting goods to the High Street shops and those associated with manufacturing those goods.

The combination of these pressures is bound to exacerbate the already toughening trading conditions; so can SME retailers be optimistic about the future? Of course they can, retailers must be optimistic above all things. The economy will move through cycles and the current cycle, though likely to be really tough, will end. The wise retailer will allow for the changing conditions in their planning and will ensure that they are entirely fixed upon the changing needs of the consumer. It might seem obvious that they will spend less - they'll be less to spend all round, but whether consumers buy fewer products, buy less often or a combination of these strategies will depend on a range of factors - too many to rehearse here, but the wise retailers mentioned before will be trying very hard to understand the buying habits of their particular customer sector and will change their own marketing habits to suit. Let us pity those larger retailers who have non-retailing shareholders that demand continuous growth and rising profit - when things are really tough, prepare the ground for future growth but be content with holding ground and retaining a reasonable profit.