The news that the Consumer Price Index has fallen to 0.3% is hoped to bring a higher level of disposable income to consumers feeling the pinch. Though according to top 20 accountancy firm, Wilkins Kennedy LLP, consumer behaviour could remain unaffected and independent retailers face losing out.
The recession brought with it a savvier shopper who knows how to get the right price for the right product and this is something they are reluctant to let go, despite having more money to spend. However, there is an imbalance occurring as suppliers can be squeezed by larger stores who use their purchasing power to keep the costs low – something which independent retailers do not have and they risk losing out on the market share.
Phil Mullis, partner at Wilkins Kennedy LLP says: “Consumers can only consume so much and whilst they may now consider making larger purchases with their extra cash, they are still the savvy shoppers they always were. Customers still expect to find a bargain and prices are coming down. Even with larger purchases, they may still wait to make the purchases at the lowest possible price, putting pressure on the retailer to keep prices as low as ever. The larger stores have the upper hand in this respect as they have higher profit margins as well as more clout to put the pressure on their suppliers to keep their prices low and pass these savings on to their customers.”
Nonetheless, independents can rest assured that only a sustained period of low CPI will enable bigger ticket purchases, and what goes up must come down.
“Independents should sit tight and ride the storm” continues Phil. “Utilise your online store and focus on your local area as well as your target offering – independents rely on their networks more than the big stores do, so when the low rate of inflation is done and dusted, this will still remain after rates rise again.”