Persistent inflation continues to impact all sectors of the economy across the globe. In the US, the white house predicted slow economic growth in 2022. Consequently, the government is implementing measures to revamp the retail trade to accelerate growth. The government hopes to accelerate growth by revamping the retail sector.
Notice that the retail sector started feeling the impact of inflation in May. Firstly, the cost of operation went up, and after some time, the economy witnessed a decline in stock prices which can only be compared to what was seen in the 1987 market crash.
The US inflation rate hit the 8.5 % mark by march. Presumably, this is the highest rate recorded in the last 40 years. The situation was exacerbated by the Russian-Ukraine war, which started on 20th February. The war interfered with supply chains and increased direct and indirect costs. It resulted in an increase in input prices, further complicating things for retailers. Despite the trouble, there is light at the end of the tunnel. Read on to see the Retail Sales recovery measures the world is taking to help accelerate growth in the coming days.
Manufacturers and Retailers to Absorb The Costs
When the high input prices are passed to the final buyers, the effect is to increase the costs of the final products. Buyers shun such products leading to reduced sales. So to maintain the current prices, manufacturers and retailers should consider absorbing some of the costs to keep the prices low. This will lessen the burden and make products affordable.
Also, manufacturers and retailers must contend with increases in the cost of manufacturing, freight and fuel charges. Of course, they can pass the cost to the final consumer, but this will impact sales. So to maintain or increase the sales level, the manufacturers and retailers ought to absorb some of the costs. Doing so will help keep prices low and make the products affordable.
Increasing Wages
Wages are set to increase again despite the 8.57% increase witnessed in August. Most employers increased wages to try to cushion the workers from the effect of inflation. In the meantime, the impact of inflation is yet to be seen on consumer spending. Consumers continue to open their wallets even though they are digging deeper into their savings. The savings stood at $3.3 trillion during the pandemic, but a fraction of this was spent as soon as the government relaxed pandemic restrictions.
Retailers Are Re-Revisiting Category Strategy.
One of the strategies consumers use to combat inflation is to become less loyal to brands. So they are turning to affordable private brands to cut on expenditure. But shrewd retailers are re-examining their category strategy, including shifting consumer preferences. Some consumers are opting for a mix of national and private brands. Thus by adopting consumer brand strategies, manufacturers will help retailers boost their sales.
Re-Orienting Supply Chain Visibility
Retailers who will re-orient their supply and distribution network, such as routing their shipments in less congested ports or lower costs lanes, are likely to cut costs. Alternatively, retailers may choose distribution centers that balance availability and charges. Others will use third-party logistics to reduce distribution overhead and balance costs and services.
The other option retailers have is to tailor new inflationary price responses by considering consumers’ willingness to pay. Further, retailers are presently re-evaluating prices and promotion mix to manage costs.
Re-evaluate In-Store Processes
Re-evaluating in-store processes and resetting the store operating model is one of the measures retail stores must put in place to check on the rising costs. Using technology, resettling labor allocations, and scheduling could help reduce the costs associated with employee turnover.
Setting Up Inflation Win Rooms
An inflation win room could be one of the options that could help manage the implication of inflation. The room could speed up decision-making and implementation. Besides, it could allow retailers to implement fact-based approaches to diagnose, track and execute wins and losses.
Final Thoughts
These measures are unlikely to solve the problem in the short run. So all of us expect the environment to remain challenging for some time. But manufacturers and retailers that will move quickly to implement some of these strategies will be able to weather the storm and grow their business resilience.
