Rising oil costs will hit retail hard

Verdict Consulting warns that UK retail could face bankruptcies and job losses over the next ten years as a number of potential risks drive up costs and reduce consumer demand.

Research highlights that the retail industry will come under pressure as factors, including tighter environmental regulation, the rising price of oil, more expensive supply chains and a reshaping of economic fundamentals, combine to push up inflation. Verdict predicts that inflation could reach 9% over the coming decade.

However, although costs are rising, consumers are spending less because they are also being hit by increases. Verdict says that, compared to last year, discretionary income – the amount customers have to spend after taxes, food, bills and other expenses – has dropped by about 20%. The fall is set to continue.

The research identified the cost of oil as a significant factor because almost all areas of retail, such as the manufacture and transportation of goods, product packaging and heating and lighting stores, are reliant on oil. The price of oil is expected to rise by $50 a barrel in two years.

“The high oil prices we are experiencing are here for the longer term,” says Neil Saunders, consulting director at Verdict Research. “They are driven by a relatively limited and dwindling supply combined with massive increases in demand. Retailers are going to have to get used to that reality and the associated increase in costs it brings.”

The research was carried out by Verdict Consulting for ActiveResilience, a division of Catalysts Ltd set up to assist all type of organisations counter risks.

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here