1、Accelerating success.The Implications of Inflation on the Retail IndustryA look into how rising inflation rates are impacting retailer and consumer decisions.Fall 2022|U.S.Retail ReportContents Introduction How We Got Here Consumer Views on Inflation Retailer Strategies for Inflation ConclusionIntro

2、ductionAnjee Solanki|National Director,Retail Services&Practice GroupsThe impact on retail based on inflation challenges has a mixed result,with consumers coping and adjusting.Although there are many indicators,the fluctuations within are driving consumers to be cautious in how and where they spend.

3、Layer the cautiousness with the angst to do and want more requires constant monitoring,forcing investors and retailers to continuously track various cycles.What we have learned post 2020-2021 and how we look forward contemplates the consumer journey.With gasoline prices,supply chain impact on freigh

4、t,manufacturing,margins,and/or the Inflation Reduction Act implications,all contribute to existing and new challenges.The only direction we must all move towards is forward,pivoting as needed and finding a good balance in that moment.Read more about why consumers are making certain decisions based o

5、n the sensitives of macro-economics.How We Got HereThe volatile consumer and macro-economic environment continue to challenge the retail industry.In 2021,the risk was on the upside,as demand for goods continued to surge and consumers returned to spending on services like restaurants;in 2022,it is a

6、downside risk.Consumers spending expectations are falling as they struggle with political discord,climate change,wars,domestic terrorism,and high inflation,which rose to 9.1%in June,its highest rate since the early 80s.Here is a brief timeline of how we got to this position:Many economists considere

7、d inflation a spent force as global growth dropped to 2.2%,its weakest pace of change in over a decade.Rising trade barriers and associated uncertainty weighed on business sentiment and activity,with globalization in retreat.Production stagnated,and central banks slashed interest rates to boost the

8、sluggish economy.2019 COVID-19 roils the global economy causing manufacturers,suppliers,and many retail/restaurant outlets to close.Quantitative Easing(QE)by central banks worldwide supported financial markets,as the U.S.Federal Reserve pumped$2.3 trillion into the stock markets in Q1 2020.U.S.crude

9、 fell to a negative value for the first time in history as stockpiles overwhelmed storage facilities.Supply chains impacted freight,held containers,and cut down on air freight.The U.S.government provides$2.2.trillion in economic assistance for American families,workers,and small businesses.Ecommerce

10、 sales hit a historical peak in Q2 2020,accounting for 16%of total retail sales.2020 Freight charges increase,and sourcing shifts to new countries.Vaccine rollouts allow the reopening of economies,and pent-up demand is released.Worker shortages and logistical troubles(including Suez blockage)follow.

11、2021 Restrictions are mostly gone.Key ports in Shanghai,China are affected by the countrys targeted lockdowns.Russia invades Ukraine,and agricultural and oil prices skyrocket.After surging to 33.8%in April 2020,the personal saving rate dips to 5.4%,well below the pre-pandemic average of 7.6%.2022Ret

12、ail Report|Fall 20224U.S.ResearchConsumer Views on InflationMore than two-thirds of the U.S.economy is fueled by consumer spending which held strong through the spring despite inflations historic highs.There are signs that the spending streak could come to a halt,as almost three-quarters of consumer

13、s say they are adjusting their spending habits.A sure indication that inflation is creating significant shifts in consumers financial outlook.As one can expect,the economic downturn is hitting lower-income groups the hardest,followed by older consumers on fixed incomes.The widespread cost-push infla

14、tion,which stems from the rising prices of raw materials and labor coupled with production and retail costs,has had a global impact.And unlike,demand-pull inflation,it will cause many consumers to experience a decline in living standards.Nominal spending aside,we are seeing early signs of a potentia

15、l pull-back as consumers engage in frugality,cutting back what and how much they buy,trading down in brands,and eliminating big-ticket items.In early 2022,U.S.consumers continued to open their wallets amid record inflation.Not surprising,considering that U.S.consumers had approximately$3.3 trillion

16、more in savings than they had in 2019.As pandemic restrictions eased,many savers dipped into those reserves,while others turned to credit cards.The nations outstanding credit card debt rose to$890bn in Q2 2022,a$100bn increase from last year.Source:GlobalData consumer panel(June 2022)Percentage of C

17、onsumers Who Say Rising Prices Are Causing Them to Adjust How and What They Spend On%of consumers in each group74.3%67.7%77.3%78.8%96.2%68.4%57.1%AllYoungerMiddle agedOlderLow incomeMiddle incomeHigh incomeRetail Report|Fall 20226Source:GlobalData analysis and consumer panel(June 2022)What Consumers

18、 Say They Will Do to Cope With Inflation%of consumers who say they will do this if prices keep risingDriving less,cutting travelCutting down on travel to stores and malls or consolidating trips to save on gas costs30.3%Trading down,switching retailers,looking for promotionsSearching for value by swi

19、tching brands or retailers,or looking to buy things on promotion52.9%Using savings,or creditUsing savings to support current expenditure or putting things on credit card and buy now pay later options43.6%Bulk buying,stock piling,buying aheadSaving money by buying in bulk and buying before prices ris

20、e28.7%Cutting back on big ticket itemsCutting back on big ticket purchases like electronics or furniture52.8%Spending less by buying lessBuying fewer items and cutting back on non-essential purchases57.2%ResaleRaising money by selling unwanted items,saving money buying secondhand31.6%U.S.ResearchDes

21、pite increased spending on travel and restaurants earlier this year,households have begun to cut back on larger purchases.Rising prices,dwindling savings,and economic concerns are taking a toll on household spending decisions.As a result,the data suggests consumers are tapping the brakes on dining o

22、ut,apparel,vacation plans,and even day to day services like manicures,haircuts,and home cleaners.Although there has been a modest softening in growth compared to the past few months,retail sales ticked up solidly in July posting an 8.6%increase over the same period last year.That said,almost all of

23、this was the result of inflation,so retail volumes remain flat to slightly down,which is a sharp reversal compared to last year when people were engaged in a buying binge.Retail spend shows no signs of abating as consumers prioritize spending on essentials and deal with the higher costs of living mo

24、re generally.Heading into the second half of 2022,inflation expectations are mixed,with consumers boosting their longer-term views for prices slightly,while reducing their year-ahead outlook for costs.44.735.635.129.826.725.625.324.722.922.721.1Food fromrestaurantsClothingEntertainment(movie theater

25、,sports events,etc.)Travel and vacationsFood from the grocery storeFashion accessories(handbags,etc.)Beauty productsSubscription services(Netflix,etc.)GasolineHome furnishingsFootwearAirline faresOtherHousehold bills18.415.89.8Source:GlobalData x thredUP consumer research(April 2022)Retail and Non-R

26、etail Categories Consumers Say They Are Cutting Back Spending Due to Inflation%of consumersRetail Report|Fall 20228Active and outgoing,seeking experiences outside the home(vs.42%in 2021)Expecting seamless experience across channelsWilling to spend but having to rely more on credit or buy now,pay lat

27、erPursuing retailers with strong ESG initiativesExpectations for the 2022 ConsumerInflations Impact on Commercial Real Estate&What It Means for Retail InvestmentsAaron Jodka,National Director of Capital Markets ResearchInvestment in retail has surged in recent quarters,and buyers are still out there

28、.Retail offers relatively higher cap rates when compared to other asset classes.This has kept deal flow moving,as retail is the only asset class with an increase in sales volume quarter-over-quarter in 2022.84%96%64%68%Source:Deloitte 2022 Retail Industry OutlookU.S.ResearchRetail inflation rate:Ove

29、rallThe last time the U.S.experienced these economic fluctuations was over 30 years ago.The past few decades have had little to no inflation,so it is a new world for retailers to navigate.Retailers have an opportunity to address inflation,integrating a step-change performance protocol to plan for th

30、e future.Step-change performance prioritizes innovative practices to inform growth long-term.As reported by McKinsey,the Great Recession of 2007 to 2009 inspired the most resilient retailers to drive 11%annual growth to their shareholders.Retail inflation rate:CategoryInflation has impacted all reta

31、il categories but none higher than food,the most significant area of retail consumer expenditure.The food at home index soared 13.1 percent in the past 12 months,the largest yearly increase since the period ending March 1979.Casual-dining and fast-food chains will benefit from consumers trading down

32、 from eating at more expensive restaurants as well as preparing elaborate meals at home.Retailer Strategies for Inflation-10.00-8.00-6.00-4.00-2.000.002.004.006.008.0010.00Jan-15Mar-15 May-15 Jul-15 Se p-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Se p-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Se p-17 Nov-17

33、Jan-18 Mar-18 May-18 Jul-18 Se p-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Se p-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Se p-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Se p-21 Nov-21 Jan-22 Mar-22 May-22Inflation is low ornegative,thanks to the rise of global supply chains and high competitionThe pandemic shut

34、down causesprices to plunge as retailers discount to clear stockAs lockdowns areeased and stimulus is injected into the economy demand surges and prices start to riseOverall Retail Inflation Rate for Each MonthYear-over-year percentage change in prices for each monthGlobalData estimates for retail i

35、nflation.Retail includes all products and categories,but excludes gasoline,automotive vehicles,household bills,and foodservice.Source:GlobalData analysisInflation is low or negative,thanks to the rise of global supply chains and high competition.As lockdowns are eased and stimulus is injected into t

36、he economy,demand surges and prices start to rise.The pandemic shutdown causes prices to plunge as retailers discount to clear stock.Retail Report|Fall 202210Financial data provider,Sentieo,recently reported that consumers are trading down on brands,opting for less-expensive options.As a result,disc

37、ount retailers and those brands with solid white-label products,like Costco and Kroger,recently commented that customers are starting to aggressively buy thier private brands.In addition to buying more private brands,Walmart shoppers are shifting toward buying what they need in smaller sizes.A win p

38、erhaps for those manufacturers leveraging Shrinkflation,which decreases package sizes while maintaining price points.2014-19 average annual inflation-0.5%2014-19 average annual inflation+0.2%2014-19 average annual inflation-0.1%OverallFoodHome+8.9%+11.2%+6.9%2014-19 average annual inflation-0.7%Appa

39、rel+7.7%Forecast Overall and Category Retail Inflation Rate for 2022Year-over-year,%Annual inflation forecast for the whole of 2022 overall and by product category.All categories are retail only,so food excludes foodservice.Numbers are year-over-year change since 2021.Source:GlobalData analysisWhere

40、 Inflation Isand Is Not12-month change in the price of:-1.4%-0.3%0.6%1.9%2.1%3.7%3.8%4.0%4.5%5.0%5.2%5.9%6.4%6.9%7.4%8.3%8.5%11.9%12.6%12.7%16.1%19.1%19.3%19.4%37.8%48.7%IT Hardware&ServicesRental CarsToysPrescription DrugsCollege TuitionMedical CareSchool SuppliesAlcoholRecreationClothingRentPerson

41、al CareAppliancesHousingFood at RestaurantsPets&Pet ProductsOverall InflationFood at HomeNew VehiclesFurnitureUsed VehiclesHousehold EnergyHotel RoomsTransportationAirfareGasolineSource:Bureau of Labor StatisticsU.S.ResearchRetail cost growthWhile inflation impacts consumers,higher costs are problem

42、atic for retailers,too.Last year,retailers prices rose by around 9.1%,masked by elevated consumer demand and higher sales volumes.This year,cost inflation is approximately 13.7%,well below sales growth,compressing margins and profits.Overall,we anticipate retail inflation in the U.S.to grow by 8.9%b

43、y the end of 2022 with rates higher in Southern states and marginally lower in the Northeast.Total Annual Retail Cost Growth ForecastYear-over-year,%Forecast cost growth for US retailers,includes all aspects of costs such as manufacturing,shipping,supply chains and logistics,raw materials,labor,over

44、heads and administration.Source:GlobalData analysisRetail Report|Fall 202212Forecast Overall Retail Inflation Rate for 2022 By RegionYear-over-year,%Annual inflation forecast for the whole of 2022 overall by region.Retail includes all products and categories,but excludes gasoline,automotive vehicles

45、,household bills,and food service.Source:GlobalData analysisRetail inflation rate:regional8.9%9.6%9.2%9.1%8.1%U.S.ResearchMost significant areas of cost inflation for retailersRetailers who struggled to keep up with surging demand in 2021 continue to face difficulties navigating inventory positions,

46、lingering supply delays and receipt of goods,and shifting consumer preferences.Retailers voiced the cost of products from suppliers(28.7%)as their most problematic inflation area,followed by shipping to the U.S.(18.4%).Record low inventory from the past two years sales levels has inventory positions

47、 suddenly bloated across most retail categories.In some cases,retailers overcompensated for hot pandemic categories like casual wear in anticipation of supply chain disruptions.As a result,consumers can expect markdowns to right-size inventory levels and replenish cash.With all these level settings

48、among stock and inventory,manufacturers will likely feel the impact next,especially if retailers start to cancel future orders.For example,delayed shipments of holiday inventory caused Bed Bath&Beyond to increase manufacturing orders,only to have their sales drop by 25%.And Target recently announced

49、 it would take more aggressive markdowns and cancel orders to clear inventories.28.7%18.4%13.8%12.6%11.5%11.5%5.7%LaborShipping in the USHQ running costsCosts of products from suppliersShippingto the USWarehouse running costsStore running costsWhich of the Following is Most Problematic for Cost Infl

50、ation?US only,%of retailers mentioning eachSource:GlobalData retailer survey(June 2022)Retail Report|Fall 202214Retailer price intentionsRaising prices is an unpleasantry for both consumers and retailers.Over the next six months,65.5%of retailers plan to increase their prices,while only 10.3%say the

51、y plan to reduce costs.All of which are likely to have severe implications on holiday sales unless retailers take a more holistic approach to their pricing.As an example,instead of implementing broad price increases that may erode customer trust,retailers can tailor their inflationary price response

52、 by customer and product segment,considering both margin performance and consumers willingness to pay.Retailer responses to inflationRetailers response to inflation varies.As we shared above,most retailers(65.5%)lean toward product price increases,while others(48.3%)are increasing service costs,and

53、more than half(56.3%)plan to use technology and automation to reduce labor and operational costs.Between the muddled supply chain crisis and record-breaking fuel prices,most retailers are refunding consumers returns and directing them to keep or donate the unwanted items.In recent weeks,several reta

54、ilers including Target,Walmart,Gap,and American Eagle Outfitters,revealed a surplus of inventory that is driving up their warehousing costs.For every dollar in returned merchandise,a retailer loses between 15 and 30 cents to handle it,decreasing the retailers net profit to a cent to five cents for e

55、very dollar in sales.Overall,How Will Your Prices Change Over the Next Six Months?US only,%of retailers mentioning eachSource:GlobalData consumer panel(February 2022)Near shore,onshore sourcingBring production closer to home to reduce shipping times and costs24.1%Raise service pricesIncrease service

56、(e.g.delivery and return fees)prices48.3%Shrinkflation and skimpflationReduce product quantities and/or reduce service levels and standards48.3%Reduce choice/optionsReduce options and choice to try and improve economies of scale32.2%Automation,technologyUsing automation and technology to cut staff,s

57、tore costs,operational,delivery costs56.3%Raise product pricesIncrease product prices65.5%Alternative energy supply,delivery efficienciesSwitch to electric vehicles,reorganize deliver routes to be more efficient,etc.46.0%What Retailers Say They Will Do to Cope With Inflation%of retailers which say t

58、hey are looking at this as a response to inflationSource:GlobalData analysis and consumer panel(June 2022)Increasea lotIncreasea lotRemain about the sameDecrease a bitDecrease a lotU.S.ResearchRetail Report|Fall 202216ConclusionNicole Larson|Research Manager,National Retail Research Inflation is a g

59、lobal issue,impacting local economies and driven by the ongoing impact of the pandemic crisis on supply chains,elevated demand,the war in Ukraine,and climate-related crop and harvest issues.Western economies have among the highest inflation rates,with the U.S.seeing its highest in 40 years.Retailers

60、 face the possibility of persistent inflation and will need to take proactive measures to streamline operations,retain customers,and drive profitable growth.Those measures provide retailers an opportunity to support consumers by tailoring products and services to their needs and budgets.Although com

61、modity and energy prices have recently begun to fall,they remain elevated,which will continue to effect retailers in manufacturing,logistics,and operations.Economic hardships will befall low-income families,with little left for discretionary spending.On the flip side,higher-income households will re

62、ly on COVID-19 savings to support spending.Non-food segments,particularly those big-ticket items,will suffer,with spending volumes falling.U.S.ResearchAnjee Solanki National Director,Retail Services&Practice Groups Colliers|U.S.+1 415 288 7871 Nicole Larson Research Manager,National Retail Research

63、Colliers|U.S.+1 954 652 4602 Neil Saunders Managing Director and Retail Analyst GlobalData Retail+1 718 708 1476 Contacts:#ColliersRetail Colliers Colliers(NASDAQ,TSX:CIGI)is a leading diversified professional services and investment management company.With operations in 63 countries,our 17,000 ente

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65、nd$81 billion of assets under management,Colliers maximizes the potential of property and real assets to accelerate the success of our clients,our investors and our people.Learn more at ,Twitter Colliers or LinkedIn.Countries we operate in63Annual revenue$4.5BAssets under management$81BLease/sale transactions53,000Square feet managed2BProfessionals17,000At Colliers,we are enterprisingNumber of countries includes affiliates.