A new report has found that inflation in the UK could result in a 2.6 percent increase in non-food retail sales, driven by rising consumer prices.

According to research by Metapack, ShipStation and Retail Economics, the sector’s sales value is expected to hit 249 billion pounds in 2023, up 18.2 billion pounds of spending on the previous year.

However, while the increase initially presents itself as a positive, the E-commerce Delivery Benchmark Report stated that the rise will be caused by businesses looking to increase the price of products in the coming year.

In a survey of over 730 retail firms across eight international markets, it was found that 80 percent were planning to increase the price of products, with 40 percent noting that rising costs would be the biggest challenge in 2023.

It falls in line with retailers facing rising input and operating costs, causing many to pass on such costs to consumers in a bid to preserve margins.

The shift could also be seen among consumer sentiments towards the economy, with 66 percent of consumer respondents citing inflation as their biggest concern.

Three quarters further stated that they plan to change their buying habits, either by only making necessary purchases or reducing their spending completely.

Despite this, retailers are said to be remaining optimistic about trading prospects in 2023, with more businesses holding a positive perspective over a negative one.

Cost over convenience

Various factors will play into shifting consumer behaviour, the report noted, including that of delivery costs, for which customers seemingly are moving away from speed and convenience in favour of lower prices.

This contrasted the response of retailers, with over a quarter reporting that they planned to increase cost of delivery for customers, while only 18 percent said they wouldn’t.

Meanwhile, retail models deemed more affordable for consumers were favoured during the report.

This included an increase in interest for online resale marketplaces and second hand purchasing, with over 25 percent of consumers saying they planned to buy from these companies more often in the near future.

The report noted that this shift is likely an offset of cost-of-living concerns, possibly accelerating the move to a circular economy.

In the end, this behavioural change could result in discounters coming out on top, leaving mid-tier retailers at a potential loss if they don’t adapt.

While luxury is less likely to see such an impact, 61 percent of shoppers in this category still stated they planned to tighten their spending, many of which adding they would switch to cheaper brands when buying clothing.

Beauty remains priority

On the other hand, beauty and health continued to remain an important factor for UK consumers. One in three respondents said they did not plan to change their spending habits in this area, with a further 14 percent preferring to trade down instead of purchase less.

In the report, Richard Lim, CEO of Retail Economics said: “Retailers will continue to face a toxic mix of pressures this year as rising input and operating costs collide against a backdrop of weaker consumer demand, rising interest rates and shifting consumer behaviours.

“These conditions favour those retailers who have strong balance sheets who can invest heavily in price, leverage data to target their most valued customers and win new ones, while efficiently utilising stores to provide a truly omnichannel proposition.

“Those that carry high levels of debt, have weak pricing power and sit in the middle of the market could find life very difficult.”