Winter is coming: brands prepare for pain in Europe | WARC | The Feed

Winter is coming: brands prepare for pain in Europe

With the screws turning on consumer spending, brands are preparing for a reality where companies are likely to be hit hard by knock-on effects of a difficult economic climate in all parts of the business: from sales, to customer experience, to logistics. 

Why it matters

A survey this spring, commissioned by the European Parliament, found that nearly 60 percent of EU citizens said they were not ready to face hikes in the cost of food or energy.

For brands, it’s a not-so-perfect storm that is set to impact business at the time it most needs a cheerful Christmas shopping season with tills ringing after nearly three difficult years of COVID. 

With staff shortages biting in essential – but often poorly paid – positions, brands are concerned that the industry meltdown affecting customer experience in the travel industry may be a sign of things to come for retail, leisure and other front-line industries in coming months. 

What it means

As war looks to be escalating in Ukraine and recession looms ever nearer, brands are set to navigate a confluence of challenges in coming months: 

1. the whims of Russian president Vladimir Putin on natural gas and oil supply to European countries pushing back on Russia’s invasion of Ukraine (France’s President, Emmanuel Macron, is already warning of potential blackouts in coming months);
2. crushing increases in essential spending for consumers due to record inflation;
3. a potential food crisis due to grain shortages and sanctions;
4. ongoing supply chain and product availability issues;
5. rolling strikes in transport as pay disputes continue, impacting logistics and delivery times;
6. staff shortages in customer service positions, with risk of layoffs elsewhere;
7. growing seasons impacted by brutal heatwaves and other extreme weather events;
8. uncertainty about the political response to all of the above, and the risk of civil unrest.

According to reporting by the Financial Times, brands have recently started ‘war gaming’ for a difficult recession and a period of low or zero growth. Earnings reports trickling out indicate that the worst is yet to come, with marquee UK brands such as ASOS, Boohoo and Curry’s already feeling the crunch.

What to watch

The unnamed CEO of a British supermarket chain, speaking to the Financial Times, described September as the “come to Jesus” month – when ‘back-to-school spending coincides with energy cost increases as the weather cools. Watch this space. 

Source: Politico, Financial Times, The Independent 

A.H.