living crisis. According to the latest consumer behaviour survey by McKinsey & Company, Australian customers are ‘cautiously optimistic’ about the state of things, but that level of optimism is clearly linked to each respondent’s level of income – the more they’re paid, the more optimistic they are.  Regardless of their financial situation, a vast majority (80 per cent) are concerned about rising inflation, and nearly 45 per cent have already decreased their spending in response, signalling a broad shift to value-based purchases. According to the Australian Bureau of Statistics (ABS), prices rose 1.8 per cent during the June quarter – now up 6.1 per cent in the past year.  But it’s not all bad news for retailers and brands. Those businesses willing to ride customers’ focus on value are set to do well, said Abe Levavi, McKinsey & Company associate partner and report co-author. “If everyone is viewing this all through the negative prism of contraction, there are going to be missed opportunities,” Levavi told Inside Retail. “The question businesses should be asking isn’t ‘how do we find a way to bridge the gap between our profit and loss?’, but looking at this from a customer’s perspective and asking, ‘what can we deliver for these customers who we haven’t been delivering before?’ “If a business has always played in the middle or premium part of the market, they could consider offering an alternative product for those customers migrating to the value space. It could be a new product, or reengineering an existing product, or a push toward private label, for example.” Levavi is quick to note that this isn’t something that will work for every brand and product, but that if a business’ ethos allows it, it is worth retailers considering where their customers’ lives are at right now. Stock levels, delivery still an issue Additionally, one of the biggest issues facing both customers and retailers is the lack of stock on shelves. With some businesses struggling to get stock to stores, customers are increasingly picking up different brands than they would normally purchase and in many cases aren’t coming back. “Sixty-five per cent of customers who are going to shop can’t complete that shop because at least one item is not available, and at least half of them are buying a different brand, or going to a different retailer,” Levavi said.  “That’s a big shift, and retailers need to think about that because when customers walk, the question is whether they’ll come back.” Another opportunity that McKinsey & Company’s data uncovered is getting ahead of customers’ growing omnichannel purchasing patterns.  While Australians are certainly beginning to utilise omnichannel shopping, on the whole, they’re still behind more advanced markets like the US.  “In the US, we’re seeing between 50 and 80 per cent of transactions done online or through omnichannel – by that, I mean they research online and buy in store, but it’s part of the one journey,” Levavi said.  “Australia is behind that, but is definitely following that trend, and I think the retailers that are seeing that are realising there’s a business case for a channel strategy that focuses on creating more convenience for customers on the front end, while also delivering a strong delivery and last-mile experience in the back end. “In other countries they’re calculating [deliveries] within minutes of a purchase. In Australia, it can still take days, or longer.” Speeding up delivery is proving difficult in many parts of the retail industry, however. A worsening supply chain crisis, which Levavi expects could last between another 12 to 24 months, has been created by a number of international and domestic issues and is impacting people on both sides of the transaction. Fulfilment operator B Dynamic Logistics’ founder Jam Pathirana told Inside Retail much of the industry’s problems come down to a staffing crisis, with fewer people able or willing to work in warehouses around the country, and the cost of fuel pushing the cost of deliveries higher. “Everyone’s buying online, and there are some big issues in the industry right now,” Pathirana said.  “It’s impacting many online businesses, whether they’re big or small. They can’t bring their products in from overseas at the moment, because the cost of containers is extremely high, so they have to either pass that cost on to the customer, or take the hit.” One way logistics businesses are looking at lowering the cost of delivery to retailers is to encourage faster delivery options to carry more of a premium, and to make longer delivery options more desirable. “Customers may be willing to compromise on getting the delivery the same day, or saving some money,” Pathirana said. “If you don’t mind waiting a few days, bigger logistics firms have the option of consolidating shipping arrangements and sending out full trucks of deliveries, rather than sending up half-full trucks every other day.”