Traditionally, retailers have had an opportunity to prosper at times of inflation, as margins could be protected or even boosted as prices rose and consumers expected them to carry on rising. But this time round it’s more tricky.
Raw material and transport costs have lifted food prices throughout the supply chain, but for retailers cost prices have rocketed at a much steeper rate than can be clawed back through rises in the shelf ticket.
For years, the experts – this magazine included – have been urging independent retailers to increase their chilled food and drink offer, and to raise standards of in-store environment through better lighting and air conditioning. This is still good advice but with energy prices rising at 50% or more a year the cost of running these features is starting to add up. All the more reason to avoid getting rolled over on to an even more unreasonable supply contract, hence our current campaign, Fight the Power.
It was only a matter of time before the rising cost of living produced rising wage demands. So a huge responsibility now rests with the Low Pay Commission, the body which recommends the level for the National Minimum Wage (NMW).
Until now, the Commission has paid little heed to the inflation rate when making its ruling – the NMW has risen by 59% in the 10 years since it was introduced, while annual inflation has typically run at less than 3%.
So now would be a most unfortunate time for the Commission to become interested in the retail price index, and let us hope that their next recommendation is both reasonable and affordable for these belt-tightening times.