With the lingering effect of inflation, consumers are facing new woes and worries that are reflected in their spending and shopping habits. These inflationary pressures will continue to impact shoppers’ habits, and retailers must adapt quickly to ensure they don’t miss out on the next decade of growth and profit potential.
Recent consumer research tells us that shoppers are responding to inflation concerns:
- 77 percent are shopping around for more deals and discounts;
- 75 percent are making more price comparisons, both online and in-store;
- 73 percent are shopping at more discount stores;
- 71 percent are waiting for big sales moments; and
- 71 percent are reducing impulse shopping and focusing more on what they came to/need to buy.
Retailers must be prepared to adapt their operations to acclimate to the state of the industry. Those that successfully navigate the current climate will see stronger sales, margins and profitability in the coming years. Here are six ways to mitigate inflation’s effects on your business:
1. Track the impact of inflation on vendor cost increases.
As transportation costs increase and overall material costs rise, vendors may need to increase your item’s overall cost structure. As a result, your planned margin and initial markup may be impacted. Retailers must seek to understand how unique an item actually is. Is this item truly driving incremental revenue, or does that demand transfer and potentially utilize this information to further rationalize and refine your assortment? Retailers see the use of advanced analytics as critical in this analysis. Further understanding the source of inflation concerns can better help retailers shift their pricing strategy, operations, inventory management and more.
2. Utilize outside factors to sense demand patterns.
As consumers, we’ve all had a bit of sticker shock at the gas pump and in stores. Gone are the days of just analyzing your historical sales data. Third-party data can be utilized to find correlations, and investing in an advanced forecasting engine is key. Advanced forecasting can utilize gas prices, inflation rates, consumer price index, and a plethora of other components as an automated input to model future demand. This demand signal can be leveraged in many downstream decisions, such as financial planning, assortment planning, allocation, and replenishment.
3. Consider price increases strategically.
Consumer price indexes, overall price elasticity, and sentiment continuously evolve with these new demand signals. Retailers need to adjust prices strategically that improve margins and don’t put off customers. Prioritizing an advanced analytics engine can ensure deeper insights and critical data into where to make price adjustments, by how much, and what products and competitors are a threat and should be matched.
4. Understand your customers.
It’s important to know what motivates shoppers and influences their purchasing decisions, while remaining aware that they’re feeling the sticker shock at each turn. Are they sensitive to price? Do your customers prefer discounts or rebates? Nearly half (47 percent) of global shoppers say a great price compels them to make a purchase when browsing, as does a special offer or discount for 39 percent of shoppers. Segmenting your customers based on historical performance, demographics and loyalty data as well as incorporating price sensitivity into the equation will help you ensure you’re targeting the right customer segment to increase the probability of redeeming that offer, minimizing marketing spending and improving overall margin potential.
5. Track your results.
Once you’ve implemented a strategy for controlling inflation, you’ll want to measure its effectiveness. You can use analytics, visualization and reporting to share these results with your stakeholders with an easy and flexible drag-and-drop user interface for dashboards, scorecards and ad-hoc analysis. Taking it a step further, it’s important to share this information with key vendor partners to enhance collaboration and automation across your teams.
6. Become the chief motivator.
Finding and retaining top talent is critical to a retailer’s success. Utilize advanced analytics and data analysis to understand what motivates your employees. Harnessing new technology that provides data-driven decisions and automation will enhance your overall team’s ability and efficiency and ensure they have the right tools to be productive and successful. Focus their time on where they can strategically add value while remaining interested and invested in employees’ interests and career goals.
Turning profits and driving revenue in hard economic times requires deeper insights for more strategic planning and a better understanding of your target customers. Retailers can be innovative and invest in the right technology to adjust their day-to-day and higher-level operations to meet growth goals without compromising loyalty.
Brittany Berg is the director of product strategy at Oracle Retail, a provider of mission-critical retail solutions, cloud services and hardware.
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