Insights

Staying Competitive in 2026: Why Retailers Must Rethink Costs

Hannah Black · Posted on: January 28th 2026 · read

Retailers are heading into a tough year. Rising costs and the further tightening of household budgets - driven by an increase in the National Living Wage and frozen income tax thresholds - leave even less room for discretionary spending. For retailers, traditional tactics such as price cuts and increased marketing campaigns may no longer suffice. To stay profitable, businesses will need to look for new ways to manage costs and streamline operations, and do so quickly.

The Margin Squeeze

Higher wages benefit employees, but they put increased pressure on retailers already working with slim margins. Coupled with cautious consumers and slower spending, the challenge is not just selling more – it’s doing so without eroding profitability.

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Explore our full 2026 Predictions

Why Price Wars Won’t Work

In the past, retailers have leaned on discounts and promotions to attract and retain customers. In 2026, that strategy may backfire. Cutting prices when costs are rising only accelerates margin erosion. Instead, the focus should shift from competing on price to competing on efficiency.

Where Retailers Can Act

So, what does reinvention look like? Here are some practical steps to be considered:

Negotiate smarter: Review key supplier contracts to identify opportunities to secure better payment terms, bulk discounts and preferential rates.
Optimise the supply chain: Look for incremental improvements such as implementing real-time inventory tracking, enhancing returns processes or streamlining delivery routes, as even small improvements can add up to big savings.
Broaden the lens on cost savings: Explore additional ways to save costs across the business, such as:
1. Using analytics to predict demand and optimise product ranges to reduce excess inventory and waste, while ensuring popular items remain available.
2. Automating repetitive processes within finance, supply chain and customer service departments.
3. Exploring collaborations with suppliers to share logistics, warehousing or procurement costs.
4. Consolidating or downsizing bricks-and-mortar locations and testing temporary pop-ups to meet demand without heavy overheads.

More than just cost-cutting, these steps help build agility, resilience, and long-term competitiveness.

MHA’s Industry Predictions for 2026

"This coming year could be when operational innovation becomes a critical competitive advantage. Retailers that embrace technology and rethink cost structures will be better positioned to weather uncertainty."

"Marketing and pricing tweaks won’t be enough to offset the pressures ahead. Retailers need to act now by investing in smarter processes, leveraging technology and building flexibility into their operations. The businesses that do this will not only survive but thrive in the evolving retail landscape."

Hannah Black, Audit and Accounts Director

If you want to explore how these trends could impact your business, contact us to discuss strategies for staying competitive in 2026 and beyond.