Almost half of small retailers managed to boost revenue over the past 12 months even as rising costs and fading consumer demand squeezed their businesses, research by Zempler Bank has found. Despite the challenging conditions, 48 per cent of independent retailers reported higher revenue in the period, while only 5 per cent saw sales decline. The high street has faced a difficult combination of mounting costs, higher taxes and reduced customer spending, partly driven by the Middle East conflict pushing up energy prices.
Yet retailers and small firms operating in this environment are doing so against weak demand. Small and micro businesses employing up to ten people named lower consumer spending as their biggest obstacle to growth. Consumer confidence has fallen to its lowest level in more than three years as cost-of-living pressures weigh on households, while high street footfall fell 3 per cent in September. Half of retailers surveyed pointed to rising operating costs as a problem, while 30 per cent highlighted higher staffing expenses.
In response, seven in ten retailers plan to drive growth through new stock, with 77 per cent intending to launch new product categories in the next 12 months. Almost all retailers surveyed, 96 per cent, said diversifying their businesses was essential to future success. The strategy mirrors moves by larger chains including Greggs and Domino's, which have introduced new product ranges. Smaller hospitality firms are similarly reinventing themselves by launching ghost kitchen brands designed exclusively for delivery and hosting pop-ups in pubs.
Separately, research by Zempler revealed that independent businesses are shifting away from major delivery platforms such as Deliveroo and Just Eat, as commission costs erode their profits. Dee Sadani, who owns three One Stop franchises in Matlock, Stoke and Etwall, said managing running costs alongside regulatory requirements had become onerous. He stated that thin margins mean profit takes a hit from cost inflation, and that rising theft targeting small retailers adds to the burden. 'Small changes mean we can't invest in our business like we did before. We need to think twice,' he said.
Sunder Sandher, who runs a OneStop convenience store in Leamington Spa, said he was adapting by managing costs carefully, stocking what customers need and keeping prices competitive. Despite efforts to grow, Britain's smallest firms are pressing for changes in the upcoming Budget. Chef Tom Kerridge has called for VAT on hospitality to be cut from 20 per cent to 10 per cent. Zempler is urging the government to increase the VAT threshold from £90,000 to £150,000, arguing that the current level creates a cliff-edge that discourages growth. Alex Rice, chief product and customer officer at Zempler, said small businesses needed certainty from the Budget rather than surprises and tax measures that could dampen enterprise.