Protecting customer experience in UK retail and hospitality

UK households are beginning to experience some relief from the cost-of-living crisis. Shoppers spent more in August, helped by summer weather and stronger demand for food, furniture and back-to-school computers, according to the British Retail Consortium. Likewise, the hospitality industry saw a modest year-on-year sales growth of 0.5% in August, marking the first positive month since April.

But despite these positive signs, businesses are still struggling against choppy political and economic headwinds. This is particularly evident among owner managed businesses. 91% rate Government support as either poor or very poor, according to 84% expect labour costs to rise in the next 12 months, and 82% expect supply-chain costs to increase.

To add to the challenge, many consumers remain cautious, reducing non-essential spending and maintaining high expectations of the brands they invest in. These twin trends – greater financial caution and sustained expectations for quality – must now inform how retail and hospitality companies control costs without undermining their long-term strength.

In this article, we’ll explore the practical steps businesses can take now to cut costs while meeting customers’ evolving needs.

Customer expectations are reshaping business models

In both sectors, customer experience has shifted from being a key consideration to a baseline requirement. Price still matters, but speed of service, staff attitude, consistency and fair problem resolution are what determine repeat custom.

Demand is holding up for affordable treats, such as fast food or themed dining, and convenience formats like delivery and click & collect. With promotions and loyalty offers now standard, operators must balance tighter margins with service levels that keep people’s trust.

As a result, our analysis shows all but the highest end of luxury retail businesses are feeling a financial squeeze, as insolvencies rise throughout all retail subsectors. But there’s also a growing divide in the luxury retail sector. According to stock market data, Hermès is the only major listed luxury retailer to report consistent year-on-year growth in both revenue and EBITDA from 2023 through to 2025. This indicates a growing divide in the luxury retail space, with only the highest performing brands accessing consistent growth.

“In this environment, a brand’s reputation on Instagram, TikTok and review sites can influence people’s opinions and habits quickly,” explains Emma Benjamin, a Partner with extensive experience in the hospitality industry. “Managing these channels doesn’t have to be expensive: the priority is knowing which interactions matter most, automating routine queries and equipping staff to handle the issues that shape perception.”

The risks of cutting too deeply

It’s unsurprising that most owner-managed businesses (64%) say they’re unlikely to make capital investment in their business in the next 12 months. Cost cuts, on the other hand, are inevitable, but where they fall matters. Reducing staff support may save money short‑term, but often leads to slower service, inconsistent experiences and lower morale.

“High vacancies and rising wage pressures are already straining front‑line service, and consumers are often less likely to return if prices rise without maintaining quality,” warns Adam Norman, an Audit Partner and retail industry expert. “Excessive cuts can erode perceived value, repeat business and word-of-mouth, and losing loyal customers is far costlier than acquiring new ones.”

How to operate sustainably while meeting customer needs

To navigate cost pressures without compromising the experience of their customers, retail and hospitality business leaders should:

Map the customer journey: Identify at which points service quality most influences repeat visits and word-of-mouth, and protect them – even when reducing costs.
Understand the impact of loyalty: Use data to assess which customer segments deliver the most lifetime value, and tailor your experiences and rewards accordingly.
Invest in technology: Tools that reduce overhead while preserving service, such as self-service kiosks, online ordering, chatbots for routine queries and reservation or tracking systems for hospitality, can deliver savings without visible declines.
Prioritise high-quality service: Front-of-house roles and customer-facing staff, even if reduced in hours or concentrated during peak times, must be trained and empowered to deliver consistently. The hidden costs of poor service usually far exceed any potential savings on wages.
Be transparent about value and loyalty offers: In promotions and loyalty deals, clarity and fairness are essential. UK consumers are increasingly attuned to misleading “promotions”, dual pricing or loyalty-card pricing that seems to penalise non-members. Being honest builds trust, loyalty and competitive advantage.
Monitor customer attrition closely: Track changes in repeat business, online reviews, social media sentiment and frequency of visits. These will often show early signs of over-cutting.

Loyalty is the new dividend of discipline

As the retail and hospitality industries continue to navigate a turbulent environment, cost-cutting is inevitable. But it must not come at the expense of customer experience. Businesses can still thrive if they focus savings on back-office inefficiencies while protecting the frontline moments that keep customers returning.

By seeking professional guidance early on, you can make sure these decisions are strategic rather than reactive. In doing so, you’ll preserve your profit margins, nurture customer loyalty and build long-term resilience even through uncertain times.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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