The impact of recent inflation on UK consumers and commerce
Samir Kamnani
·September 13, 2024
In the United Kingdom, the cost of living has grown steadily over the past five years due to rising inflation rates: An item that cost £10 in 2019 would now cost £12.41 on average, representing a price hike of nearly 12.5%.
As a result, consumers are cutting back on unnecessary spending. Six in 10 adults in Great Britain say that they’re spending less on non-essential items due to cost of living increases, and retail sales fell by 1.2% month-over-month in June 2024.
These changing consumer behaviours can be worrying for merchants, but with the right strategy in place, you’ll be well-equipped to navigate a shifting ecommerce market. In this article, we’ll learn about the impact of inflation on the ecommerce space, and discover tactics for building a sustainable business despite high inflation rates.
The impact of inflation on ecommerce
Despite reductions in spending, a consumer survey by Digital River and Opinium found that nearly half of British consumers are continuing to purchase at least one item online each week. In fact, a third of shoppers are purchasing online more frequently over the past six months than they had in the past.
A leading reason? Many of these shoppers are getting savvy about price shopping and choosing the options that offer the best value for money. They find it easier to comparison-shop online, where they can evaluate many different stores’ pricing options at a glance, than they do in-store.
However, delivery costs remain a concern for these price-conscious shoppers. Nearly half of them (48%) would love to see merchants offer more free or cheap delivery options.
Additionally, 41% of survey respondents say that if they need to cut spending further, they’ll look to minimise their online spending.
How to win over price-conscious customers
This data all shows that UK shoppers are more concerned about price than ever—so how can you win them over?
Offer a Buy Now, Pay Later (BNPL) plan
For more expensive products, you’ll be able to grow your customer base through adding BNPL purchase options, so that your shoppers don’t need to foot the entire bill upfront. By offering low- or zero-interest payment plans, you’ll be able to help your shoppers fit their purchases into their budgets more easily.
Focus on everyday low pricing over promotions
Rather than offering high retail prices with occasional deep-discount sales events, build a business model focused on offering the lowest price you can all the time. Low prices are a primary driver for shoppers, with six in 10 saying that low prices are even more important to them than a convenient shopping experience.
Build a generous customer loyalty program
These days, shoppers are more likely than ever to switch brands for the sake of a good deal—so make it worth their while to stick around by building a great loyalty program that offers perks like free shipping, gifts, and discounts. Loyalty programs can lead to higher spending levels: 79% of shoppers belong to at least one loyalty program, and 78% of them buy more from those brands than their alternatives.
Stand behind your products
When customers are concerned about spending, every dollar counts. By building generous and flexible return policies that let customers return products for any reason, you’ll give shoppers the confidence they need to choose your brand. Make sure that you offer convenient return options, such as drop-off returns: Half of shoppers have abandoned carts because the brand didn’t have a convenient return option, and nearly half don’t have ready access to a printer for printing return labels.
Navigating high inflation rates as a business
We’ve looked at ways to win over more price-conscious customers—but what other strategies can your business put into place to combat rising costs? Here are some ideas for lowering your costs and boosting your profit margins.
Streamline your inventory
When customer habits are shifting, it’s important to consolidate your inventory to avoid holding on to old stock that’s not likely to sell. Pay attention to sales trends over time, and stock up on product types that are performing well in the current economy whilst liquidating those that aren’t.
Build a secondary line of business
Most returned products end up in landfills—but by partnering with a resale platform, you’ll be able to come up with a second life for your products, while supporting environmental initiatives. Partner organisations like Arrive or ReCurate can help you create a secondary branded marketplace on your site, where you can generate more revenue from secondhand goods.
Offset your ecommerce reverse logistics fees
The cost of returns doesn’t just include the product, which likely can’t be resold—it also includes the cost of shipping, packaging, and restocking the product, which can cost your business up to 60% of the original retail price altogether. To offset these costs, consider using Loop’s Offset feature to encourage customers to pay a small fee (e.g. $1.98) at the time of purchase to guarantee free returns if they need to send an item back.
Customise the return process based on the item
You’ll likely find that it’s not worth the cost to ship back certain items if you know they can’t be resold. Using a UK returns management solution like Loop, you can set conditions to determine the right next step, helping you save money on reverse shipping expenses by encouraging shoppers to keep unprofitable items in a “returnless refund.”
Optimise for exchanges
Finally, look for opportunities to recapture lost revenue through exchanges in the returns process. By using Loop, you can present shoppers with the option for an instant exchange or store credit that they can apply to a later purchase, with the ability to shop your entire store. This seamless return experience helps Loop merchants preserve up to 80% of revenue from returns.
By delivering a consistently great customer experience and using technology that optimises for revenue and customer retention, you’ll be able to set your brand up for sustainable growth in any economy.
Learn how Loop can help. Book a demo.
In this article
Stay in the loop
Subscribe for product updates and Loop's biweekly newsletter.
Book a demo with Loop today!
With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.