Keep Your Business Healthy by Reducing the Impact of Inflation
One of today’s hottest topics is run-away inflation. Government experts, industry leaders, and think tanks engage in a conversation on solving the problem. However, these key players need more consensus on what should be done to reduce inflation. Like consumers, small businesses seem caught in a matrix that grows more turbulent daily. Seventy-one percent of owners indicate the rising cost of goods has negatively impacted their operations. While inflation has declined for six consecutive months and is expected to drop to 3.2 percent by the end of the year, the lower rate is still significantly higher than the 2-2.5 percent targeted by the Federal Reserve.
The pandemic made independent enterprises resilient. Many businesses survived one of the worst economic downturns and returned to profitability. Yet much of the progress of the past two years is now being eroded by inflation. By most indications, high inflation will be around for a while. Rather than having a wait-and-see attitude, store owners are hunkering down for the long haul and taking action to lessen the impact. It’s assumed that most businesses will raise prices since doing otherwise will steadily erode profits. Yet, additional steps can be taken to make companies more efficient and better prepared for crises. Possibilities include:
- Product shortages caused by disruptions in the supply chain.
- Rising shipping costs and fuel prices
- Insufficient inventory to meet customer demand
- Employees demand for higher wages and expanded benefits
Owners need to take decisive action to generate revenue and combat the effects of inflation. Developing alternate strategies to accommodate unforeseen variables requires flexibility and modifying the original plan. Implementing measures to increase efficiency will benefit the operation in the long term and make it better prepared for economic downturns.
Recent studies indicate some employees value a flexible work schedule more than money. It’s often difficult to achieve work-life balance in a small business since there are typically fewer people to share the workload during peak selling periods or when someone is absent. Yet, owners must accommodate employees’ schedule requests as much as possible to maximize productivity and encourage independence in the workplace. The goal is to let employees work when they are most productive. Allowing someone to start an hour later to drop off a child at daycare eliminates stress for the employee and shows concern for their wellbeing. In a tight labor market, it’s critical to maintain your existing staff and avoid unnecessary disruptions that communication can quickly resolve. Happy employees are more productive and seek ways to contribute to the team.
Offer more private-label brands
Big box retailers have expanded their assortments of private label brands for a simple reason. The profit margins are significantly higher than those of national brands. In years past, consumers were reluctant to trade in their favorite brands for a lower-priced alternative product. However, when the pandemic caused the economy to plummet, many people cut back on spending and tried products they had never considered purchasing.
- Forty percent of consumers have bought more private brands than before the pandemic
- Three-quarters of these shoppers plan to continue doing so,
- (63%) perceive private brands to be a good value
- 55% buy private brands because they are less expensive.
Offering more private label goods offers shoppers options that may be more budget-friendly, without price being a barrier to making a purchase. While retailers should continue to carry national brands to be competitive and satisfy consumer demand for these products, retailers are not primarily dependent on these goods to stay profitable.
Promote Your Best Sellers
Every store has products that are so popular they practically sell themselves. Owners can use these products to their advantage. Since these items are already successful, the trick is to sell more to a broader group of consumers. Whereas previously, retailers focused on in-store sales, consider promoting the product online and on social media. The items already have a proven track record of solid sales, so there is little risk of getting stuck with excess inventory. There may also be an opportunity to negotiate with the manufacturer for lower prices.
There are other options you can try to keep your store healthy and mitigate the effect of inflation on your business. In tough times, taking a new approach can be the key to generating additional sales.