Rising inflation, a cost-of-living crisis and escalating salary costs are creating a perfect storm for small retailers. However, there are numerous ways to cut down your expenditure. Here leading industry experts reveal how SMEs can ‘trim the fat’ to ride out uncertainty in 2023…
1. Smarter energy saving
Energy bills are among the biggest culprits of today’s astronomical small business costs. By now you’ll be aware that switching to LED lightbulbs and turning down your thermostat can help reduce your usage. However, new technology is giving some SMEs an even clearer view of how much electricity they’re consuming – enabling them to take immediate action.
Offering a more in-depth alternative to supplier smart metre displays, these new business tools can identify energy usage down to a single plug socket, providing business owners with valuable data so they can take be proactive about saving costs.
“Our Business Energy Intelligence system is an energy data visualisation tool that can identify how and when a business is using energy, alerting you if you need to take action from any anomalies causing an unexpected jump in usage,” says Mohammed Kavla from SSE Energy Solutions (info.sseenergysolutions.co.uk). “Knowing when power is being used needlessly can help you save money – and these days it all adds up.”
2. Return to sender
According to returns management software provider ZigZag Global, retail returns in the UK are increasing year on year – and they’re costing businesses money. Its research shows return rates jumped by 14 per cent in 2022, with 22 per cent of all products bought in January 2023 being sent back for a refund.
While retailers have historically offered shoppers a free online returns service, some are now recouping lost profits by charging for the privilege: “I expect to see more retailers looking to introduce paid returns and for that to become increasingly normalised in 2023,” says ZigZag CEO Al Gerrie. “We’ve supported several retailers in trialling paid returns over the last few years and none have switched back again. This is an important indicator that the strategy is not only working, but here to stay.”
For indies that want to continue offering free returns but still want to save costs, Gerrie suggests offering the service as part of a loyalty scheme: “This could work, for example, by offering customers a free return on their next order or free returns on orders over £100,” he says. “There is also the opportunity for retailers to introduce free returns to incentivise customers to return items more quickly, as this will help retailers in restocking and reselling popular items.”
3. Bag a discount
Reducing supplier costs is a great way for small businesses to save money and securing discounts might not be as difficult as you think. Retailers were offered a 5 per cent reduction on orders placed with participating brands such as Louche, Caprice and DKNY at Just Around the Corner, which is expected to return as an incentive next season. Some brands such as Lily and Me also offer customers a discount on stock if they are able to pay early. “Our normal payment terms are 30 days from the date of the invoice, however, if settled within seven days the customer can deduct a prompt payment discount off their invoice total,” says production coordinator Polly Webb.
Meanwhile, the cost-effectiveness of joining a buying group should not be understated when it comes to reducing stock costs. James Crabtree, head of fashion at INDX organiser Associated Independent Stores (AIS), says: “AIS makes use of a bespoke central payment system (CENPAC), allowing members to save both time and money through improved settlement discounts from our network of worldwide suppliers and group merchandise rebates.”
Finally, Peter Marshall, CMO at digital marketing agency Add People, says small business owners should try and reduce costs on everything else they pay for: “Negotiating is vital for any small business from your supplier contracts to the conditions of your lease,” he says. “Getting a lower price allows you to save on your cash flow, get better deals and help you remain competitive – all of which you need to succeed, particularly in periods of financial turmoil.”
4. Next gen card payments
Indies can save money on every sale they make by swapping their card payment provider. Launched last year, payment app Lopay claims to cost less than a third of big-name players like PayPal while providing retailers with a free card reader, too.
Co-founder Richard Carter comments: “When you’re looking for ways to trim your outgoings, there’s one regular cost that’s easy to miss – the fee you pay to take card payments. Because the fee is deducted automatically from each transaction, it can pass unnoticed. But with big name payment brands like PayPal charging small businesses up to 2.9 per cent for the privilege, the cost quickly mounts up.
“Switching to a new generation, low-cost payment app is an instant way to save money on every sale you make. Lopay charges as little as 0.79 per cent and we even offer our card reader for free.”
5. Open all hours?
The way people shop is changing – and retailers need to adapt. Some high street pub chains and restaurants have introduced reduced opening hours to save on energy and staffing costs – and this is a move we could potentially see more of in retail too.
Charlotte Rees John, partner and head of Irwin Mitchell’s consumer sector group, says: “Small retailers should analyse when the peaks and troughs in trade are and choose their hours to match peak periods rather than having the lights and heating on for minimal returns.”
When it comes to staff wages, she also suggests introducing alternative incentives to ensure employees feel valued: “Instead of a pay rise smaller retailers could also consider staff benefits such as bigger discounts, increased amounts of holiday entitlement, or greater flexibility on working hours. “
6. Magic marketing
Digital marketing is a vital part of running a small business in 2023 – but it can be expensive and time consuming to get right. If you feel you need to improve your knowledge, there are free resources available online alongside in-person workshops and events via Growth Hub (use Google search to find out what’s on offer in your area). The government also offers funded courses for small business owners through its Help to Grow scheme (helptogrow.campaign.gov.uk).
However, according to retail expert Wizz Selvey (wizzandco.com), one of the best ways to market your business is by building a personal brand and all that costs is your time. “Digital fatigue is a big challenge as more people crave meaningful human interaction,” she says. “Integrating your story and point of view into your business, so you are recognised, is powerful. People buy from people. Creating an emotional connection by ensuring you and your business are memorable will unlock more growth and revenue. You are your biggest asset!”
7. Join the club
While it may seem counter intuitive to pay for subscription fees in the current climate, becoming a member of an association such as Bira can help you save money in the long-term.
Bira offers its members a range of benefits including a free legal helpline providing advice on employment issues, contacts and health and safety. It offers cheaper business insurance deals with an insurance partner specialising in retail businesses. There’s also free access to a buying group, which includes ever day items you need to buy for your business such as LED light bulbs. Meanwhile, members can receive preferential rates on card processing with Global Payments while its broker can help you find a cheaper energy deal. Lastly, Bira’s weekly newsletter keeps members up to date with industry trends and the latest money saving offers, with special deals on everything from website developers to the AA.
“There are great benefits of being part of a bigger community,” says CEO Andrew Goodacre. “We are convinced that we save all our members their subscription fees if they buy into our services.”