Inflation has become a genuine problem for businesses in a variety of industries. Increases in household demand, supply chain shortages, and a strong labor market have all contributed to inflation in recent days. As an inventory-based business, it may not take long for you to start feeling the strain. Fortunately, there are some things you can do to combat inflation, allowing you to pivot your business strategy, continue to provide value to your customers, and successfully navigate a recession.
During periods of high inflation, supplier diversity may be more critical than ever. Some suppliers will naturally have higher costs than others. You may find that one supplier is able to provide lower-cost goods due to excess inventory or supplies, while another may need to raise prices due to high shipping costs. Make sure you have a solid understanding of who the best suppliers are for your business and what each can offer.
Just as many consumers will choose to shop local during tough economic times, in part because they want to ensure that local businesses are able to stay afloat, shopping local can have a number of key advantages for inventory-based businesses. Local suppliers are often able to help you save on transportation costs, which may mean lower overall costs for the goods you need most. Pay attention, however, to where local suppliers are raising prices and how they compare to others.
Consumer needs may change dramatically during periods of inflation. You may discover, for example, that customers are less likely to buy certain luxury items, or that they will spend more time shopping around for deals that reflect their current needs. However, that does not mean that customers will stop buying altogether. Consumers may actually spend more in some areas during a recession. Pay attention to how your target market changes their spending throughout those recession periods and change your inventory accordingly.
You may need to pivot your business strategy during a recession or periods of high inflation to ensure that you are able to continue to meet consumer needs. Some types of products will thrive even in the midst of difficult economic times. For example, candy sales, alcohol sales, and children’s goods may all remain popular purchases even during a recession. If your business can provide those products, it can provide considerable benefit for your target market. Your inventory management software can help you keep up with changing consumer needs and the changed product lifecycle during your journey to maintain profits during high inflation.
For many businesses, the tendency, during periods of recession, is to pull back on unnecessary spending. You may be tempted to slash your marketing budget. However, past history shows that brands that market during a recession are often more successful than those that pull back on their marketing efforts. Not only can those brands see increased consumer interest during the recession itself, but they may also note that consumer spending increases as they come out of the recession.
Pricing your goods correctly is critical during periods of inflation. You want to make sure that you’re able to make a profit on your goods. At the same time, however, you want to set prices that are appealing to consumers, who may not have as much money as usual to spend on your products. Furthermore, consumers during inflation are more likely to focus on sales and promotions, so you may want to consider pushing out regular promotions to your target market. Carefully gauge how those sales are impacting overall profits to get a better feel for how you may want to use them to continue to grow your customer base throughout periods of high inflation.
When you know that periods of inflation are coming, or you’re watching prices creep ever higher, it can be useful to negotiate with your suppliers ahead of time. A long-term contract with your suppliers can help lock in lower prices and put you in a better position to keep your costs low. A long-term contract with a dependable supplier can also help ensure that goods keep coming even as you manage your inventory and try to keep up with consumer need during an economic downturn.
During a recession, it is particularly critical to carefully consider what goods you want to order. Some inventory-based businesses may choose to stock up early on items. That strategy can allow you to bring in the goods you usually sell at lower costs, helping you keep your overall costs lower throughout a period of economic recession. However, there are several other things you may need to keep in mind when determining whether you should bring in extra stock.
Inflation can be very hard on an inventory-based business. You may find yourself struggling to keep up with consumer demand or to ensure that you can meet your profit goals while still providing a reasonable experience for your customers. Effective supply chain management software can help you better manage your inventory, sourcing, and more. Contact StockIQ today to learn more about how we can help.