Australia’s retailers are being warned that the worst impacts of the Middle East conflict are yet to come, as tightening conditions impact energy, logistics, and essential materials.

“A ‘triple shock’ is hitting retail at once. Rising operating costs, unstable supply timing, and weakening consumer confidence,” Kate Hart, senior partner of consumer and retail at consultancy firm Kearney, said.  “Over the next 12 to 18 months, this will create a clear divide between retailers built for disruption and those still optimised for calm conditions.”

Modelling conducted by Kearney found that every $1 billion in revenue can now risk between $16 million and $18 million of earnings. At the same time, it cited the impact of petrochemical supply on packaging costs.

Kearney claimed that retailers across grocery, liquor, pharmaceuticals, and electronics could be the worst affected.

The growing sense of urgency among retailers has been highlighted by the country’s leading industry body, the Australian Retail Council (ARC), which called on the Federal Government to accelerate regulatory reform and provide cost relief for retailers.

It comes as the ARC conducted a survey that found that supply chain conditions have worsened over the past month for three in four businesses, while shipping and freight costs have increased by more than 10 per cent for three in five retailers.

“Around two in five retailers now expect they will need to increase prices by approximately five per cent within the next three months to offset rising costs, with some anticipating larger increases if current conditions persist,” ARC CEO Chris Rodwell said.

“Costs are rising, margins are tightening, and retailers are being forced into difficult decisions. Retailers are doing everything they can to shield customers, but unless we see improvements, the supply chain disruption will unfortunately be felt by customers at the checkout.”