Two investment areas retailers ‘must consider’

Retailers are putting their businesses at risk by holding back on store investment to cope with the rising cost of wages and pensions.

According to the ACS Investment Tracker, a record-breaking £181m was invested in convenience stores in the last quarter, but the overall spend per store was down by 1.4% year on year.

James Lowman, chief executive of the ACS, expressed concern that smaller independent retailers were delaying investments in order to handle the costs of the national living wage and auto-enrolment pensions.

“When we asked retailers what their response to the national living wage would be, many said they would delay their investment plans,” he told Retail Express.

“If you think about the cost of employing someone in 2020 – we’ve projected that it will be £11.07 an hour – retailers need a strategy to generate the margins for that.”

The research also found that 69% of retailers were funding investments from their own reserves.

“There is no one-size-fits-all scenario when it comes to investing,” Lowman continued. “But there are probably two areas retailers must be considering.”

The first of those is bringing standards up to fit customers’ expectations, which covers anything from lighting to ranging. The second is refrigeration, which Lowman advised is key to meeting customer demand.

“People want to shop more locally, but they want to be able to buy what they need to feed their families with,” he said. “This means that produce in the fresh and chilled categories are essential. It’s therefore hard to generate the margins to afford wages and costs without investing in credible refrigeration.”

Lowman also warned that if retailers aren’t thinking about making any investments at all, they risked cutting themselves off.

“Down the line, retailers might find themselves falling behind competitively because they don’t generate those margins or offer enough range,” he said.