The grocery sector is between a rock and a hard place

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The grocery sector is between a rock and a hard place – rising supply chain costs and inflation mean stores have a thin line to walk between breaking even and alienating cost-conscious customers.

Kantar results today reveal that grocery prices were 14.7% higher YoY than last October, with fresh food prices alone rising by 13.3%. With inflation like this it is inevitable that consumers will tighten their purse strings on non-essential as well as essential seasonal spending.

To remain competitive at this difficult time, supermarkets must optimise costs where possible – this means being more agile when it comes to what they stock and where they stock it. They should, for example, align stock buying with data-driven store assortment based on consumer demand, to support availability (whether that be in-store, online or in dark stores) and ultimately maximise profit per square foot of the store space.

This should be in addition to price match schemes, which are increasingly significant to modern shoppers, to stay competitive as pockets are squeezed. On top of this, it’s important to mirror this on the supply side, continuing to negotiate hard with suppliers to keep prices down.

Margins will continue to be squeezed as retailers battle inflation for the next couple of years at least. While they can’t absorb all the costs of this, they must become more agile when it comes to changing the mix in stores and optimising costs where possible.