Industry Issue: Cost Of Living Crisis

With inflation currently at 9.1% (at the time of going to press), five consecutive interest rate rises pushing up mortgage repayments, average energy bills estimated to rise to £3,000, food bills sky rocketing and petrol heading for £2 a litre, the cost of living crisis is intensifying.

With consumers already tightening their belts and making changes to their shopping habits, what will it mean for the gift industry in the coming months? PG&H asked suppliers and retailers for their views.

“The cost of living crisis is certainly of real concern to many of us in the gift and lifestyle sector,” says Chris Lewis, head of independent sales, Gallery Direct. “The more people feel they are affected by inflation, as household budgets are squeezed, the less we know they will spend, That said, there are still plenty that fall into the camp of having disposable savings and wanting to spend it on home improvements or gifts for their loved ones. We are therefore optimistic that, with the right design-led products, there will be a strong market.”

the storm? “Yes, we believe that the gift sector will be resilient. As always, it is about quality, choice and value for money, so it’s important that we all focus on delivering to satisfy these fundamental client needs.”

Consumer buying patterns: “This year, less will be more. There will be demand for high quality products at the very best prices, so we all need to work hard in our Autumn buying cycles to find value within the marketplace.”

Top retailer tips: “Cut costs where you can but remember to put your customers at the heart of all you do. It often doesn’t cost anything to ‘go that extra mile’ with your customer service and your own creative advice. Find ways to excite and interest and, most important of all, keep positive and stay optimistic.”

“I think we’ll all be heading for a tough six months,” predicts Adam de Wolff, director of The Indigo Tree, which has stores in Crystal Palace and Streatham. “As the financial landscape adapts to global pressures, customers will be more cautious with their spending and the need to focus on sourcing quality and affordable products.”

weather the storm? “Despite the pressures on customers’ wallets, they will still have occasions to celebrate, so if we are smart with our buying and pricing we should weather the storm, but we have to buy creatively.”

“We are anticipating that customers will have much tighter budgets, possibly buying for fewer people this Christmas, and we have ordered more cautiously as a result. We are hoping that if spending habits are not massively impacted we will be able to place top-up orders at the Autumn trade shows.”

“One thing that cheers people up is celebrating and giving,” points out Paul Hooker, managing director, Joe Davies.

“Luckily, most general gifts are a relatively low spend versus the happiness of giving something to someone special. Traditionally, in tough times, our trade has fared better than most. Suppliers will be seeking to minimise the impact of inflation by making sure they have a broad range that is excellent value and available in sensible quantities. At Joe Davies we have worked hard at this, and have absorbed as much of the inflationary pressure as possible, without passing it on to our customers.”

weather the storm? “We are extremely fortunate that the heart of our industry is made up of many vibrant, independent businesses, all full of people with passion and drive. Independent retailers are always innovating and are extremely resilient, so the UK gift trade is in great shape to handle whatever comes our way.”

differently? “One thing that will not change is that consumers will want to see new product in their favourite shops. Value always shines through, and retailers will buy well designed, innovative, good quality products. Despite everything, goods from China are still amazing value.”

Top retailer tips: “Look for suppliers that have a broad range, a low minimum order and sell in sensible quantities per line, allowing ‘little and often’ purchasing. Consolidate supply and avoid large stock holdings. Don’t be shy on buying, be bold and buy into new ranges but keep a weather eye on stock. A great outlook with everything is try, test and refine.”

“With most people having less money in their pockets, this undoubtedly will have a negative effect on sales,” comments Phil Verrils, sales director, Gift Republic. “We are already seeing a slowdown, particularly with online customers, many of whom have seen tremendous growth over the past couple of years but do seem to be returning to lower pre-pandemic levels now.”

storm? “As I see it, the gift industry is in an enviable position as people will always look to buy presents, and Christmas will still come!

“While we may not see the continued recent growth that many of us have experienced, the industry, and particularly forward-thinking companies like ourselves, who have continued to invest in a stream of new and innovative products, will always do well.”

Consumer buying patterns: “It is only natural that with everything that is currently going on in the world, retailers will take a cautious approach, particularly regarding higher priced items. I would imagine that most will be very conservative with their buying, looking at lower priced items with a higher perceived value rather than stocking higher ticket items that they may have bought previously.”

Top retailer tips: “While caution is clearly the order of the day, retailers should get in early to ensure that they have stock of the best items on your shelves, even if it is by ordering on a little and often basis.”

“I certainly think people will think more carefully as to the type of gift to buy,” predicts Karen Ritchie, owner, The Rowan Tree, Budleigh Salterton.

“Practical and environmentally-friendly items will, I'm sure, be popular rather than purely ornamental, though this has already been the case for a few years. Toiletries, and nicely packaged soaps in particular, are a great pick up gift and I expect we will sell more greeting cards as people mark a birthday without splashing out on a large gift. Possibly people will want to pop in a small gift such as jewellery, coasters or keyrings as a little something extra, without spending too much. I suspect customers will shop locally to save fuel though, and so far, we are still

getting lots of holidaymakers who seem happy to spend well on a special treat or memento as a memory of their break.”

Continues Karen:“I’m sure that purchases will be more considered as the cost of living rises, but we must continue to provide value for money without compromising on quality.”

Will gift retailers be able to weather the storm? “The gift industry has been through some rocky patches before and I am sure will survive, although I suspect there may be some casualties along the way. I do believe customers are keen to buy British made goods but until we see British companies manufacturing gifts competitively, the major gift brands will continue to be imported. However, if their prices continue to rise, it's possible some brands will become less popular with customers who are trying to support greener British products.”

Will you be buying differently? “We will be buying a little less Christmas product this year, as I am sure some people will make do with the decorations they already have and may prefer to spend their budget on food and drink. However, I remain optimistic, and we will continue to put on a fabulous display to keep our customers in the festive spirit.”

“I think it would be naïve to believe that all the extra money burdens that the average family will be experiencing will not have an effect,” says Bill Nettelfield, owner of Bill & Berts in Colchester. “So far, spending is still up on last year, but not by vast amounts. Here in Colchester, it’s great to see a noticeable footfall increase in European visitors, especially from Germany, The Netherlands and Scandinavia.”

the storm? “There’s no reason why we should find ourselves any better off than other sectors. Where we as independents will gain is, as always, with great customer service that, without doubt, we do better than the multiples.” Will you be buying differently? “Not really. I believe we still need to stand out from the crowd and provide a great selection of gifts for all occasions, all year round. Christmas obviously is huge for us all, but it’s not the only reason for stocking up the shop. As independent retailers we need to constantly keep our stock selection fun and updated.”

“I’m semi-confident about the cost of living crisis and how it will impact on the gift industry,” says Piers Croke, sales director of Gisela Graham. “Of course, what we offer is definitely in the ‘discretionary’ part of the spectrum, but I take some comfort from the increase in staycations, a legacy from the pandemic, which looks like persisting. Plus, the chaos at airports is further discouraging foreign holidays. Surely gift shops are going to benefit from both?”

weather the storm? “A bit of schadenfreude but I’m glad I’m not in the furniture trade! The gift business is, by definition, entrepreneurial. We’re small and nippy, used to having to adapt, and quickly, to new circumstances. So yes, I’d say we’ll weather the storm. Inevitably retailers will be more cautious. I expect gifts retailing for under £25 will do well.”

Top retailer tips: “Look for originality, good perceived value-for-money, and modest minimum quantities!”

“Obviously prices will increase, especially in terms of carriage and delivery,” says Olivia Riley, owner, Little Boat Gifts in Brightlingsea. “At the moment, we are doing the best we can for our customers, but unfortunately, with the cost of living crisis constantly in the press, and with so many negative comments about the economy constantly in the media, we have seen the inevitable drop in footfall which always happens when it plays out in the media.”

Will gift retailers be able to weather the storm? “I’m naturally concerned about the cost of living increases we’re going to be seeing in October and how they will impact on business. Nevertheless, we have always strongly supported our local community and we therefore hope that our regular customers will do what they can to support us.”