From a renewed focus on technology, such as digital price tags, to the growth of convenience and online shopping, UK retailers are having to adapt to shifting consumer behaviours and economic pressures.
As the insurer of choice for many UK retailers and stores, NFU Mutual understand the unique risks facing the retail sector. In this article, the insurer explores the key themes, trends and challenges shaping the industry.
Higher costs and value-seeking shoppers
Retailers, which are finely attuned to the economic backdrop and consumer behaviour, are operating in an environment in which UK consumer confidence and spending has generally remained subdued.
The sector has been squeezed for some time by the impact of cost increases, which are expected to continue throughout 2025. This includes higher staffing bills from April after the rise in the National Minimum Wage and employers’ National Insurance Contributions (NICs).
Many savvy consumers are hunting for value. According to research from American Express, shoppers want “more bang for their buck,” and will seek out special offers. Many will buy from alternative retailers if they feel they can get a better deal elsewhere.
One other change is an increased focus on convenience. Food and grocery spending in UK convenience stores is projected to reach £43.2bn by 2028, according to GlobalData. This is faster growth than the research company predicts for supermarkets and discounters. This change may partly reflect declining consumer preferences for shopping in supermarkets, alongside a growing interest shopping locally post-Covid, especially among home workers.
Some consumers are avoiding bricks and mortar, however, at least for part of their shopping needs. The percentage of online sales in the UK remains well above pre-pandemic levels, having reached a record-breaking £127bn in 2024, according to Retail Gazette.
Among types of products that have been particularly popular online are food, fashion, household goods, DIY, furniture, and home furnishings.
In fact, research from The Times suggests that people in the UK do more shopping online than in many other countries – Brits shell out an average of £64 a week on online purchases.
Increasing investment in technology
Technology is high on many retailers’ lists of priorities. Global spending on retail technology according to PWC is forecast to grow 10% each year between 2024 and 2028, up from 4% in the previous four-year period.
Priorities for tech investments among retailers include marketing and customer engagement platforms, point-of-sale payment solutions, and omnichannel commerce platforms. Stores are also using technology within their operational functions, such as security solutions to minimise losses, and inventory management and demand planning to improve supply chain visibility – particularly technologies such as RFID for item tracking.
New technologies can also help retailers save time in the face of rising costs. For instance, one high street electrical chain is reportedly planning to put electronic pricing – digital price tags that replace traditional paper labels on shelves – into 100 of its 300 UK stores by the end of 2025. Self-service checkouts, normally seen in supermarkets, are also spreading into fashion and homeware stores.
AI is increasingly becoming part of retailer’s toolkits. In 2024, the Retail Times suggested that the top reasons for UK online retailers to use AI technologies were for translations, customer service chat bots, and for cleaning and enriching product data.
Smaller retailers are often at a disadvantage when it comes to technology. While large retailers may be in a position to invest in technology and AI, smaller retailers may be limited by a lack of resources.
But for retailers of any size, an investment in technology requires a focus on cyber security. Many retailers consider cyber and data risks as among their biggest concerns. Yet, there are concerns that large retailers in particular are showing signs of cyber security ‘apathy’: law firm Irwin Mitchell analysed large UK retailers’ annual reports and found those in the FTSE 100 on average refer to ‘cyber security’ 12.5 times – compared to 19.7 mentions per report across the entire FTSE 100.
Red tape and crime
Compliance with regulations remains a headache for retailers big and small, with laborious administrative tasks, record-keeping, reporting, and simply continuing to meet standards.
This spans rules on employment, health and safety, environmental protection, data protection, consumer protection, and more. Compliance is made all the more challenging by the complexity of regulations and keeping up with changes.
In some cases, this regulatory burden is growing, particularly in areas such as sustainability; for instance, with the Simpler Recycling rules having come into force for businesses from 31st March 2025.
Meanwhile, shops are increasingly being targeted by thieves: shoplifting is “out of control” and increasingly brazen, according to the British Retail Consortium (BRC). Customer theft cost retailers £4.2 billion last year (including crime prevention measures), according to the BRC. Theft and violence have become closely linked, with violence and abuse against shopworkers up by 50% last year, when more than 2,000 such incidents were recorded on average each day.
Protecting your business
Working with an insurer who understands your sector and the risks your retail business faces is key. With a network of over 280 local agency offices located in throughout the UK, NFU Mutual is committed to offering high quality insurance solutions, risk management advice and first-class personal service, helping your retail business thrive today – and for years to come.
To find out more about NFU Mutual’s insurance solutions for retailers visit NFU Mutual shop and retail insurance
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