With weekly news about beloved UK retailers going into administration or seeking drastic investment, it’s no secret that the sector is facing a challenging period of economic pressure.

Costs have been rising and the imminent rises in the National Minimum and Living Wages and business rates are only set to compound the issue.

So, what’s the answer? Wholesale transformation projects? Bringing in consultants at great expense to play back what your business has told them?  

We explore some practical ways you could make cost savings – helping you to improve your cash flow and to do more with your budgets.

High Rising Costs

Retailers will be all too familiar with these costs impacting their operations and profitability:

• Energy Prices: Energy costs soared in late 2022. Although the energy prices have since fallen, they are still around twice as much as they were at the start of 2021. Retailers, particularly those with large physical premises were heavily impacted. Earlier this month the government confirmed the Energy Bill Discount Scheme (EBDS) to support businesses will end on March 31, after hopes of an extension.
  
  
• Rental Fees: The cost of retail space in prime locations remains a significant overhead. Since landlords are facing higher mortgage rates and insurance costs, that is unlikely to change in the short term. 
  
  
• Shipping & Logistics: Supply chain disruptions have continued to affect retail, with increased prices for imported goods due to global shipping challenges and Brexit-related adjustments. Many brands who import via the Suez Canal are experiencing additional supply chain costs, as they choose air freight or longer shipping routes to avoid the red sea, due to attacks on ships at the end of 2023 and start of 2024.
  
  The British Chambers of Commerce reported 300% increase in container hire costs and logistical delays that extend delivery times by three to four weeks, leading to cashflow difficulties and component shortages. The new government customs checks and procedures and rising fuel prices have added to the costs.
  
  
• Consumer Demand and Retailer Pressures: The cost-of-living crisis has taken a toll on businesses and households. Consumer confidence remains low and retail sales volumes in 2023 were the lowest in four years (British Retail Consortium). Retailers are faced with the delicate balance of managing increased costs without alienating cost-sensitive customers.
  
  

Further Increased Costs Imminent

Wages

The UK government announced wage increases for April 2024, with the National Living Wage and the National Living Wage set to rise.

According to the Department for Business, Energy & Industrial Strategy, this increase is part of a broader commitment to ensuring a fair wage for workers. For retailers however, this adjustment means higher payroll costs, necessitating strategic financial planning to accommodate these changes.

Business Rates:

Retail bosses have hit out at Jeremy Hunt’s “bitterly disappointing” decision to press ahead with substantial rises in business rates of 6.7% from April.

The outdated method of charging business rates based on rent puts brands with store presence further on the backfoot, compared to online only businesses.

Helen Dickinson, Chief Executive of the British Retail Consortium, said: “When shops we love shut down, when jobs we need are absent, and when investment we benefit from is lost, it’s our lives and our communities which lose out.

“Government inaction will now cost the retail industry £470m extra every year in business rates.

“This rise in rates does not exist in a vacuum – retailers are also contending with cost pressures throughout the supply chain, in the context of the largest increase to the National Living Wage on record.

Alex Baldock, CEO of Currys, said: “It’s no wonder that more and more stores are having to close their doors when you look at all the cost retailers are facing.

“Sky high business rates, coupled with big increases to wages, and misjudged proposals like those on recycling, heap ever higher costs on those of us with physical stores. The result will be higher inflation, lower growth and fewer jobs.”

Although the Autumn Statement 2023 announced an extension to the 75% business rate relief for eligible retail, hospitality and leisure properties for 2024-25 to support SMEs, there are calls to overhaul the whole system rather than ‘sticking plaster’ relief schemes which do not benefit all.

Improve margins – practical costs saving approach

Despite the challenges there is an effective strategy brands can employ that offers immediate financial relief but also positions retailers for long-term success in a competitive market:

Offshore Outsourcing

Offshore outsourcing offers retailers the ability to access skilled labour at a fraction of the cost. By delegating time-intensive non-core functions, the likes of Customer Support, IT Support, Digital Marketing, Finance, and Back-Office Admin, you can reap the following benefits:

• Low Labour Costs: Outsourcing is a cost-effective solution – especially in offshore locations whose labour rates are far lower than the UK. 
  
  
• Reduced Capital Expense and overheads: By outsourcing, you can avoid capital investments in technology, infrastructure and overheads associated with in-house teams such as rent and energy costs.
  
  
• Access to the latest skills and technology: Outsourcing partners can assume responsibility for keeping up to date with technology upgrades and training.
  
  
• Scalability: You can easily scale your support needs up or down based on seasonal demand, new product launches, or market expansion, without investing in additional resources or redundancies during slower periods.
  
  
• Focus on Core Business:  By handing over routine tasks to a trusted partner experienced in managing the details you can redirect your focus towards growth and the creation of unique propositions that stand out in the market. Plus, with the savings achieved, you could invest in exploring new markets, involving setting up physical stores in new locations or expanding e-commerce presence to reach a global audience.

Also Read: Achieving Customer Satisfaction in the face of Supply Chain Disruption

End Note

Rising operational costs and upcoming wage increases present significant challenges for UK retailers. However, an offshoring offers a viable solution – freeing up cash flow to invest in core strategies for sustainability and competitiveness in the market.

Achieve More with Cost-Effective, Quality Services

Grappling with rising cost pressures? Explore Taskaler’s budget-friendly outsourced solutions to operational challenges – from customer service to web operations and back-office admin.

Whether you need full offshore support or a flexible extension to your team, we can provide experienced people to help. With offices in the UK and a service-delivery centre based in Lahore, Pakistan, we deliver cost savings of up to 50%, compared to in-house teams.

Talk to us to discuss your needs. Together let’s mitigate cost challenges and drive your business forward!