The eurozone is experiencing its steepest inflation in decades, with the rate soaring to a record 8.9 per cent in July, primarily driven by supply chain disruptions, post-pandemic pent up demand and the effect war in Ukraine is having on energy prices. This has had a consequential impact on a number of industries, most notably retail, Welbee’s CEO and Retail Marketing Ltd Executive Chairman Jonathan Shaw explains to WhosWho.mt.
This is influencing “all parts of the retail supply chain, from growers and shippers to suppliers and consumer packaged goods,” Mr Shaw said.
Mr Shaw was named Welbee’s Supermarket CEO in June after he was voted into the role by the Board of Directors at Retail Marketing Ltd, the company that owns and operates the supermarket chain.
Given the "diverse clientele profile" that Retail Marketing has, it is difficult for Mr Shaw to make a generic statement on the change in consumer habits, especially since "some might have curtailed spending in other areas, for example, eating out at restaurants which would on the upside increase grocery purchases," thus the shift works both ways.
“Yet, what’s for sure is that the increase in prices due to the increase in cost of goods is noticeable by and to everyone and there is a heightened awareness of what’s being placed in the trolley,” he added.
This awareness is particularly evident when it comes to impulse purchases or “treats”, which have become “more contained”. However, inflationary pressures are also leading to consumers to switch brands, “especially where a price increase was noticeable”.
“Studies have shown brand loyalty decreases when prices rise. So much so that, our exclusive Carrefour private-label products have become more attractive and in demand since customers have access to excellent quality products at better value prices,” Mr Shaw explained.
Additionally, Mr Shaw said that customers are becoming more aware of Welbee’s loyalty offers and shopping amount thresholds in order to receive a €3 cashback voucher with a €50 shop, and a €7 euro voucher when spending €100. “Previously, a percentage of shoppers ignored these offers, but now this percentage is less,” he added.
Welbee’s was formed late in 2021 after the merger of local supermarket chains Park Towers, Valyou, Tower, and Trolees, aiming to offer “an even better experience” than before through its eight locations spread across Malta.
Malta registered an inflation rate of 6.5 per cent in July, continuing the persistent rising trend after it reached 6.1 per cent in June, 5.8 per cent in May, 5.4 per cent in April, and 4.5 per cent in March.
The war in Ukraine is a global challenge that has had a significant impact on consumer behaviour, leading to Welbee’s having to “take decisions that deliver the right prices in the right places at the right time to drive revenue, while also at the same time delivering customer satisfaction,” Mr Shaw remarked. This is also coupled with the fact that many consumers suffered a hit to their earnings over the course of the COVID-19 pandemic, and so such inflation will undoubtedly result in lower purchasing power.
Asked when he thinks such rapid and widespread inflation will come to a halt, Mr Shaw said it seems that “most of the food products have stabilised in price and the global outlook is giving indications that we might see a downward correction from October onwards”.
In an attempt to combat escalating inflation, the European Central Bank (ECB) raised interest rates in July for the first time since 2011 by a larger-than-expected half-point.