7.29.2022

How to Protect Your Retail Sales Amid Rising Inflation

Written by Lauren Valensky

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It’s no secret that the last few years haven’t been easy, and globally, we've all felt the pinch in different ways – whether it’s through our waistlines, wallets, or worrying levels. And with inflation now on the rise, it doesn't look like things will be getting easier anytime soon.

However, it's not all doom and gloom. Amidst all the economic uncertainty, opportunities still exist for businesses to grow and thrive. In fact, there are several ways to protect your retail business from the impacts of inflation - you just need to know where to look.  

Fortunately, we do. So, let's explore some key ways you can keep your retail business afloat amid the rising inflation curve.

What is inflation?

To understand how to protect your retail business from inflation, it’s first important to know what inflation actually is. 

In short, inflation is the rate at which prices for goods and services rise. It’s measured as an annual percentage change and is usually caused by increases in the cost of living, or in the cost of raw materials and wages. 

Factors that affect areas like raw materials or the cost of living include oil prices, housing costs, and food and energy prices.

What are the effects of inflation on retail businesses?

In most cases, inflation hurts retail businesses. As the cost of raw materials and wages quickly increase, so too does the price of goods and services, which sees the purchasing power of consumers decrease. In other words, people have less money overall to spend on goods and services and will be less likely to buy discretionary items.

Looking to inflate your retail business' revenue?

What’s more, as inflation starts to take off, the value of money also decreases. For retail businesses, this can make it difficult to invest in growth or expansion plans, as the money you have available won’t go as far. However, while inflation may have its downsides, there are also many positive effects of rising prices that retail businesses can take advantage of:

Increased foot traffic

Inflation can lead to increased foot traffic since people are more likely to take advantage of sales and discounts in order to save money amidst price rises. This can benefit businesses by providing them with the opportunity to upsell and cross-sell other products and services that may, or may not be on offer.

Moreover, as people become increasingly price-conscious, they are also likely to do more research before making a purchase, which means they are more likely to visit your store or website multiple times before finally buying something. This gives you more opportunities to market other products and services to them.

Raised revenue

In some cases, inflation can have a positive effect on retail businesses and the wider economy.  When prices rise quickly, customers are often willing to pay more for items that they perceive as being of high quality or value and become keener to buy in order to avoid further price hikes down the line. This extra spending can give a boost to businesses, especially start-ups and small businesses that may be struggling.

Extended reach

Another potential positive effect of inflation is an influx of foreign tourists and thus extended reach. If the value of a currency, such as the US dollar, falls against other currencies, it becomes cheaper for people from other countries to visit and spend money in the USA. This can be great news for retail businesses who rely on tourism, such as those in big cities or near popular tourist attractions.

Keen to share upon their return, these traveling customers are also more inclined to contribute to word-of-mouth marketing, provided they're offered a pleasant and memorable shopping experience.

Top tips for protecting your retail sales

Now that we’ve covered the basics of inflation and how it can affect retail businesses, let’s take a look at some practical ways to protect your retail sales in the face of rising prices:

Encourage customer loyalty

One way to combat the effects of inflation is to encourage customer loyalty by offering loyalty programs,  rewards, or discounts to your patrons.

This will not only encourage them to spend more each time they visit your store but will encourage them to keep coming back even when prices are rising.

You could also offer discounts for customers who purchase items in bulk, or for those who pay cash instead of using a credit or debit card. This can help to offset the economic effects of inflation, as well as encourage customers to spend more with your business.

Invest in marketing

As we’ve seen, inflation can lead to people becoming more price-conscious and doing more research before they make a purchase. This makes marketing even more important, as you need to ensure that potential customers are aware of your products or services, and the reasons why they should buy from you rather than a competitor.

A well-targeted marketing campaign can help to increase brand awareness and build customer loyalty, both of which are essential for weathering the storm of inflation.

Regularly review your pricing strategy

One of the most effective ways to counter the negative effects of inflation is to review your pricing strategy regularly. This means keeping an eye on the cost of your raw materials and overheads, as well as monitoring competitor prices and the latest market trends.

By making small adjustments to your prices regularly, you can ensure that you are always offering competitive rates, without eating into your profits too much.

Adapt your product mix

If you find inflation is starting to eat into your profits, it may be time to reconsider your product mix. This means looking at the products or services you currently offer and making adjustments to ensure that your most profitable items are given prominence. For example, if you run a clothing store, you may want to focus on selling more items with a higher profit margin, such as accessories or footwear.

Manage your margins

Inflation can bear heavily on your margins since the price of raw materials and overheads such as rent and utilities can all rise. As a result, it’s important to keep a close eye on your costs and ensure that you're always getting the best possible deals.

This may mean switching suppliers, negotiating better terms with your current suppliers, or looking for ways to lower your overheads, like reducing your staff costs by offering more flexible working hours, for example.

Watch your business balloon with a powerful POS system

Point-of-sale systems are the backbone of retail businesses for several reasons. Designed to work as a complete business management system, Epos Now allows you to control all aspects of your company from one cloud-based system.

  • Review auto-generated profitability reports based on individual product performance, trending items, best and worst sellers.
  • Multi-award-winning inventory management that syncs sales across multiple channels and ecommerce platforms. 
  • Customer management systems that save customer contact details and shopping preferences for more targeted marketing.
  • Integrations with over 100 apps, including marketing, accounting, bookkeeping, and loyalty program apps.

 

Looking for more ways to get your business blowing up? We'd love to hear from you!

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