future of retail
THE OUTLOOK for UK retailers appears challenging. The increase in employers’ national insurance contributions (NICs) from April will add more than £2.3 billion to retailers’ annual costs, according to the British Retail Consortium (BRC). A 6.7% increase in the national living wage, also from April, will add another £367 million and a rise in business rates £140 million. Small wonder a BRC survey in January
2025 found two-thirds of retailers planned to raise prices to cover the NICs increase and 70% of retail chief financial officers were pessimistic about trading. Gillian Simpson, Deloitte partner for
digital and retail, said: “Retailers are very much under cost pressures.” But she noted: “Stores are getting
investment.There is a consensus around trying to move retail staff into more customer-facing activities. Businesses realise the store associate- customer interaction is the reason customers go into a store. So, retailers will do anything to allow store associates more time with customers. Store associates will be more expensive following the increases in the minimum wage and employers’ NICs, and retailers are trying to put them in the most value-adding areas. Her colleague Dr Bryn Walton, Deloitte
lead on consumer industry insight, agreed saying: “Not only are there big costs, but it’s expensive to borrow money. Yet businesses are still making investments. There is some M&A activity, but there are also major digital transformations taking place. Retailers have to do this to future-proof their businesses. So, we see investment in enterprise resource planning (ERP) systems, in moving customer relationship management [CRM] systems to the cloud, and in technology stacks, because if you don’t make the investment now, with all the changes around AI and advanced analytics, you’ll be left behind.” Digital retailing continues to
see innovation. Simpson explained:
Cost pressures are driving digital investment
The accelerating rate of innovation in the sector poses a serious challenge
“The biggest area of development in digital retailing is around search and ‘discoverability’. Gen AI conversational search is on quite a lot of retailers’ sites now, so you’re not bound to search terms the retailer would recognise. You could search for ‘A dress for a cocktail party on Saturday night’ as opposed to navigating through women’s dresses. There is also social commerce, and the power of TikTok and influencers in product discoverability, and we’re starting to see a trend around using ChatGPT for shopping search. “From a retailer’s perspective, there are
so many channels in which a customer could reach your site, businesses have to invest in all of them just to keep up.” Walton noted: “ChatGPT is now
integrated into WhatsApp, so you could text ChatGPT saying ‘I am planning to go on a holiday next week, what are some good options?’ and it could come back with a list of hotels. You don’t have to be on the internet, you don’t need a ChatGPT account. The implication for the travel industry is complete disintermediation.” He added: “We’re seeing AI agents with
the ability to conduct tasks unprompted now. With a co-pilot, you would ask ‘Is this
FIGURE 47: RETAILERS’ RESPONSES TO RISE IN EMPLOYERS’ NICS*
% of retail CFOs saying businesses will:
Reduce head office staff Cut hours/overtime Raise prices
Cut capital expenditure Reduce store staff
Delay store openings Invest in technology Freeze recruitment Reduce profits
0
UK TRAVEL industry spending on IT is necessarily on the increase (Figure 44)
10 67% 56% 52%
46% 46%
44% 42% 31%
25% 20
30 %
*National Insurance Contributions **Chief financial officers Source: British Retail Consortium, January 2025
40 50 60 70
Travel Weekly Insight Report 2025 29
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