What’s impacting the retail & wholesale sector?
These are tumultuous times for the UK’s retail sector. A shift in consumer spending habits and the rapid growth of online shopping platforms, such as Amazon, has reduced footfall on the high street and placed increased pressure on the operating margins of many SME retailers.
Despite this, UK retail sales totalled £395 billion recently and businesses in the sector are striving to differentiate their offerings by providing an enhanced customer experience, easier access, improved payments and faster delivery.
Supporting the retail and wholesale sector
We advise retail, wholesale and online retailers, as well as sector-dependent clients. We work closely to find solutions to industry issues, utilising our expertise in everything from business strategy and corporate finance, to audit and tax advice.
A pathway to profitable growth for SME retailers
Increased consumer caution, combined with a shift in spending habits and the rapid growth in online shopping through digital platforms such as Amazon, have led to a reduction in high street footfall while increased competition is proving hard to bear for many small and medium-sized retailers, regardless of whether they are operating on or offline, or both.
Supporting international retail businesses
Idahoan wanted to test the UK market by supplying through the US company to see if their product would be popular with an overseas consumer market. They were introduced to Menzies who applied some BrighterThinking to their situation.
Whether you need an agile format, whilst you are testing the UK market, or wanting to fully expand into the UK, Menzies can provide comprehensive assistance in all areas to ensure nothing is missed.
Key challenges for the retail sector
Supply chain management
Supply chain management is critical for many retailers, particularly those trading in the EU. As well as keeping their supply chain relationships under review, retailers may need to renegotiate contracts to reduce their risk exposure. Inventory control is essential for storebased retailers, due to high property costs, but online retailers also need to meet increasing customer demand for next-day delivery, whilst keeping delivery costs competitive.
The investment required in technology and fit-outs can be a strain on cash flow but in some instances, such investments may be eligible for R&D tax relief or other reliefs. Taking advantage of such tax reliefs can help to minimise cash flow disruption and reduce tax liabilities. Determining the correct VAT treatment can also be a challenge, particularly where businesses are buying and selling goods overseas, or making online sales.
Operating margins for many high-street retailers have been hit by falling sales and rising costs, such as the higher cost of labour and imported goods.
Growing consumer caution is also impacting sales, putting further pressure on profits.
To optimise profitability, on and offline retailers need to know where their profit potential exists and where it will come from in the future. They should also be prepared to restructure their business model to improve their long-term profitability.
With 2.8 million employees, retail is the UK’s largest private sector employer. Recent increases in the National Living Wage, combined with the cost of pensions auto-enrolment, have pushed up labour costs, impacting operating margins.
The sector’s high dependency on low-skilled EU workers also means there is a prospect of labour shortages in the future and this could increase costs further
Digital technology is an increasingly important means of differentiating and personalising the consumer shopping experience. As well as investing in greater use of mobile Point-of-Sale devices, many retail businesses are introducing advanced technologies such as Augmented Reality and other sophisticated technologies to improve flow and personalise their proposition. For bricks and mortar retailers and etailers alike, improved data analytics can improve business decision making and enhance profitability.