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Physical Strategies to Navigate Challenges Posed by the Cost-of-Living Crisis

Full report: Changing Consumer Values & Behaviour: Building a Competitive Proposition in Retail

Physical Strategies to Navigate Challenges Posed by the Cost-of-Living Crisis

This article is part three of our three-part mini-series, derived from our report 'Changing Consumer Values' in partnership with Alvarez & Marsal, which explores how consumer values are changing, what’s shaping them and how brands should react. Check out the other two parts of the series at the bottom of this page.


5 minute read


As consumer values continue to evolve rapidly, retailers and consumer-facing brands will need to adopt a laser-like focus on how to define their proposition while protecting their profitability against a backdrop of rising costs, ongoing supply chain disruption, squeezed household incomes, and fragile consumer demand. Structural shifts towards digital cannot be ignored if brands are to remain relevant.

Please remember this article contains only a small amount of the content contained in the report, download the report for even more insights!


Defining a strong value proposition –

A more cost-conscious consumer is emerging. They will reshape how they perceive value, with the attributes of quality, convenience and experience being sacrificed for lower prices, although demands regarding ethical standards will likely remain in place.

Businesses must ensure they anchor their proposition around value for money while offering relevant ranges across channels in a fiercely competitive market.

Key Strategies include: 

Investing in price - It will be important for businesses to invest in competitive pricing, and work with suppliers to sharpen their communication around promotional activity which is market specific. In some markets, this will require businesses to invest in price while ensuring that product quality is maintained.


Regional sensitivity -Businesses must adapt their value strategies according to regional differences due to factors such as income level, digital maturity, government support and culture. Our research shows that consumers are willing to make different compromises in different markets, such as sacrificing quality for price or forgoing convenience. Adapting the value proposition accordingly is crucial for businesses.


Environment, Sustainability and Governance (ESG) - Maintaining high ethical standards are ‘non-negotiable’ for most consumers, regardless of country. Paying a fair wage, ethical sourcing and telling a compelling sustainability story are critical components within the consumer value set.



Redefining Customer Experiences –

Creating positive customer experiences has become an increasingly important way for businesses to connect with customers in a hyper competitive environment.

Key strategies include:

Role of the store - Stores must adapt to serve multiple purposes, offering both experiential and operational functions that support omnichannel customer journeys. This shift towards multifunctional stores is often coupled with a reduction in the number of outlets as online sales grow in importance.


Enhancing the delivery experience -  Consumer businesses should attempt to enhance the delivery experience by offering timed delivery slots, accepting returns, removing old products for disposal and offering additional services that consumers are willing to pay for.


Instant access - Our research shows that cost-conscious consumers disproportionately value immediate access to products in-store. Better visibility of stock availability, and managing consumers’ expectations around promotions, particularly where inventory levels are important, will be critical for generating positive customer experiences.



Evolving operating models –

Businesses must review their operating models to cut costs and improve efficiencies, whilst continuing to focus on digital transformation. This requires thorough reviews of supply chains, supplier contracts, logistics, warehouses, stores, personnel, leases, marketing, and digital infrastructure.

Key strategies include:

Agility - Businesses must be agile in responding to market changes, consumer sentiment, and monitoring key metrics such as basket size, average transaction value, online penetration, and private label growth. By adapting promotional messaging and exploring innovative tactics like social media marketing, in-store digital signage, and dynamic pricing, businesses can significantly increase customer engagement and satisfaction. For instance, promoting products only when inventory levels allow to avoid customer disappointment, and reacting promptly to competitor promotions to protect market share.


Digital investment - Digital investment options include supply chain optimization, leveraging data science, dynamic pricing, demand forecasting, and automation, such as robotic process automation (RPA). Automation can be applied to various tasks, from accounts payable/receivable to manual retail processes like purchasing and promotions. Workflow management software can simplify decision-making processes, leading to increased productivity. As labour costs rise and technology costs fall, businesses should regularly evaluate the feasibility of automating manual processes.


Omnichannel first - The online window to capture consumers' attention is very brief, and inconsistent cross-channel experiences or "clunky" websites are unacceptable due to shrinking attention spans and increasing user experience standards by big players. As in-store and online experiences merge, providing a frictionless customer journey through appropriate technology is essential to meet customer expectations. Meeting customer needs with a seamless shopping experience, including effortless product discovery, online purchasing, and in-store returns supported by seamless technology, presents significant opportunities for retail brands. Failure to do so risks losing customers to competitors who can meet their heightened expectations around the shopping experience.


navigating cost of living

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This work forms part of a wider piece of research and is a downloadable in pdf format


Data, Insights and Personalisation –

Maximising opportunities from shifting consumer values requires advanced data analytics to convert big data into actionable insight. Data harvesting (e.g. social media listening or AI-driven insights through customer data or message boards) will be critical for retailers to gain a competitive advantage ahead of evolving consumer values.

Key strategies include:

Personalisation - Data science, including AI, data mining, and analytics, can extract behavioural insights for personalised marketing strategies, which will be crucial in a highly competitive market. Personalised messaging based on these insights can foster deep and long-lasting customer relationships, allowing businesses to effectively convey their value proposition and connect with customers intimately.


Customer acquisition - In today's online battle for consumer attention, utilizing big data for sophisticated marketing strategies that provide customers with relevant content at the right time and channel is crucial. However, acquiring new customers must be done within budget. This requires an understanding of cost-attribution and revenue allocation, including accurate ROI calculation for digital ad spend and a physical presence. Advanced analytics, AI, and customer insights are also key for effective ROI modelling and intelligent investment decisions.


Enhancing loyalty - As more cost-conscious consumers emerge, loyalty scheme benefits will become more valued and integrated into consumer behaviour more generally, therefore influencing how and where consumers shop.




Flexible Supply Chains -

Improved strategies are likely to involve using shorter, more flexible supply chains better equipped to deal with supply shocks; and importantly, able to address changes in consumer values in response to external conditions (e.g. cost-of-living crisis, geopolitics, pandemics).

Key strategies include:

Simplification and diversification - Businesses should explore simplification of supply chains by making them shorter, often involving more on-shoring, near-shoring and re-shoring. Supply chains can also include more sources, and reduced overreliance on single countries.


Understanding cost to serve - Any move to near-shoring will have an impact on margin due to local cost differences. Businesses will need an understanding of these differences to build mitigation options and pricing scenarios. There is a clear trade-off between agility and inventory write-offs.


Final mile - The final stages of the supply chain has seen consumer expectations for cheap and speedy delivery become normalised. Consistently achieving these objectives will require investment towards more automated distribution centres and micro-fulfilment hubs (and potentially ship from store) to meet this shift in demand at scale.


navigating the cost of living crisis

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Found this short article interesting?

This article is the third in a three part mini-series from our report 'Changing Consumer Values'


  • Part one can be found here
  • Part two can be found here


View Full Report Here

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