Large stores on the shopping streets of European cities are forced to pay big bills to deal with the higher cost of living crisis. Executives and investors who attended the World Congress Retail in Barcelona last week painted a relatively bleak outlook for the industry as clients who are aware accuracy, spend sparingly and pay more attention to exciting shopping. Changing this trend requires a lot of money, which only the powerful can afford. Spain’s blue skies were no match for the clouds over the retail sector.

The annual conference is an opportunity for executives from companies such as American Eagle Outfitters, Alibaba, Havaianas, Shein, Marks & Spencer and Mango to discuss important industry trends right now.

But after two years in prison, with shops closed and supply chains disrupted, Mr. inflation was the “slogan” at the speakers’ tables. The cost of space heaters, coupled with employee demand for higher wages, is cutting operating profits for top players in the space, such as Sweden’s H&M and Britain’s Next. In 2019, before the start of the pandemic, the Swedish fast fashion giant and its UK rival had operating margins of 7.5% and 18.3%, respectively.

This year they are forecast to fall to 5.4% and 16.8%, according to Refinitiv data. Decreasing disposable income makes it difficult for these retail groups to increase sales to protect margins. Hugh Peel, chief economist at the Bank of England, said last week that the British should accept that the situation has worsened simply because of inflation. A survey of more than 550 retail groups conducted by the Boston Consulting Group and presented at the conference found that eroding consumer confidence was one of the top concerns for industry leaders.

In addition, 72% of respondents said that in 2023, shoppers will be more price conscious. And it’s a dashing hope that established brands will be able to copy luxury goods and fashion groups like Hermes and Chanel, who have simply raised their prices to make up for their rising cost. base. As revenues are under pressure, some businesses are taking austerity measures. Last November, H&M cut 1,500 jobs to save nearly 2% of its operating income.

Finally, the large German department store chain Galeria Karstadt Kaufhof plans to close 40% of its stores. However, this strategy risks leading to long-term weakening. If retailers don’t invest in expanding their stores or donate staff, shoppers are more likely to move on to brands that promise a pleasant shopping experience.

British discounter Primark has just launched a Disney cafe in its stores, while Inditex, which also owns Zara, will invest €1.6bn in its stores and expand its warehouse network.