Industry must adapt to radical societal change

The grocery retail environment is undergoing radical change. Both retailers and their suppliers need to adapt to reflect societal changes, such as cuts in social payments to poorer sections of our society, the chief economist for the grocery think tank IGD has claimed.

According to James Walton, "tensions have built up in our economic and social systems that can't be endured indefinitely". Walton was speaking at a breakfast briefing before last month's IGD convention in London. He warned that there were tough questions that needed to be resolved around issues such as democracy, debt, class and growth in our society.

"Businesses have to be seen to be a part of the solution and not a part of the problem," he said. It will mean businesses putting shoppers ahead of their shareholders and stepping in to "supplement" what the State is no longer able to provide, he added.

Sovereign debt

Walton argued that, as fewer people in the UK voted, business influence was displacing voter influence. He added that official figures of UK sovereign debt were currently "well over £1 trillion that's £17,000 for each UK citizen". But, he added, with other debts included, that was probably nearer to £34 trillion.

"So far, investors have been happy to go on funding that, but that can't go on for ever. Sooner or later government has to show that it is under control and we will hear how they respond on December 5 [when the Chancellor makes his autumn statement]," said Walton. He said this debt level would be a "toxic legacy" if left for future generations to deal with, so "something has to be done and it is going to hurt".

The swingeing cuts likely would change consumer behaviour even more, he added. While noting that Chancellor George Osborne had already announced £10bn of cuts in the social security budget, he suggested that more were likely. And yet, some sections of the British public equivalent to 12.4M people were reliant on social security payments to some degree or another, he added.

Strategic customer group

"The very poorest people in our society will be forced to search for ways of making their money stretch and so we can expect them to be very active in switching products, services and stores and hunting for value," said Walton. "They will be a key strategic customer group in the years ahead."

However, the middle classes were also changing their buying habits, he said, since their skills weren't delivering the increases in wealth they had in the past and therefore they weren't seeing the same social progression. "The UK is becoming less equal over time."

Despite "very faint signs" of a recovery from the UK recession, any future growth in the economy was likely to come from business investment and exports, not from household demand, he said.

Walton added that the traditional model of endless demand growth in our society needed to be reset. "Even when prosperity comes back, the previous eagerness to spend may not."