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More Than Half of Retail Businesses are Using Inflation to Price Gouge

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Archives, Global Logistics, Global Trade Daily, Special Reports

More Than Half of Retail Businesses are Using Inflation to Price Gouge

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As the economy recovers from the COVID-19 pandemic, inflation has surged in recent months affecting both retailers and consumers gearing up for the holidays.

In November, Digital.com surveyed 1,000 retail owners and executives to discover how inflation is impacting profitability, pricing, and discount offers this shopping season.

Our findings revealed that more than half of retail businesses are using inflation to drive up prices higher than what’s necessary to offset increased costs.

Key Findings

-56% of retail businesses say inflation has given them the ability to raise prices beyond what’s required to offset higher costs

-Over half of retailers have increased prices by 20% or more on average

-52% of businesses are offering fewer or no discounts this holiday season

-Shrinking discounts and increasing price of complementary products are most popular ways businesses are driving up prices

56% of retail businesses have increased profits beyond inflation to boost profitability

When asked how recent inflation has impacted profitability, 56% of retail businesses responded that inflation gave them the ability to raise prices beyond offsetting costs.

Large enterprises (LEs) were more likely than small and medium-sized businesses (SMBs) and small and medium-sized enterprises (SMEs) to say they were using inflation to more than offset costs at a rate of 63% compared to 52% of SMBs and 55% of SMEs.

“What’s interesting about our findings is that more than half of respondents say that while they used inflation as a reason for price increases, they expect higher profits as a result,” says Digital.com’s small business expert, Dennis Consorte.

“In other words, businesses are inflating already inflated prices in order to turn a bigger profit amid people’s fears over uncertain times.”

Automobile, e-commerce, and electronics industries most likely to hike prices

Our survey revealed that the automobile, e-commerce, and electronics and appliances industries were most likely to be capitalizing on inflation.

Of the businesses we surveyed who belonged to the automobile industry, 72% indicated they raised prices to more than offset costs. Sixty-five percent of e-commerce and 62% of electronics and appliances businesses also admitted to price gouging.

Over half of retailers have increased prices by 20% or more

Eighty-five percent of businesses have increased prices, and 55% of retailers have increased prices by 20% or more on average.

Of those who have increased prices, 28% of large enterprises increased prices 50% or more, compared to 6% of SMEs and 12% of SMBs.

When asked why they have increased prices, 66% of businesses cited rising inflation, 69% supply chain issues, and 57% increased demand.

52% of businesses are offering fewer or zero discounts this holiday season

This holiday season, 38% of businesses will offer fewer discounts than last year, and 14% will not offer any at all.

Smaller businesses are offering fewer discounts this holiday season compared to larger enterprises. Fifty-seven percent of SMBs and 56% of SMEs say they plan to offer fewer or no discounts, compared to 36% of LEs.

It comes as no surprise to Consorte that many small businesses are offering fewer discounts this year.

“Many small businesses are still recovering from lockdowns and other COVID mandates. With the Omicron variant upon us and inflation at a 30-year high, decision-makers feel uncertain about future revenue. For them, fewer discounts could be seen as a way to keep the doors open through the holiday season.”

Clothing and accessories (74%), electronics and appliances (66%), and furniture and home furnishings (57%) are the industries that are most likely to be offering fewer discounts this holiday season.

Businesses are increasing price of complementary products, shrinking discounts

Among businesses that have increased prices, 55% shrank discounts, and 48% increased the price of complementary products.

Furniture and home furnishings (51%), health and personal care (50%), clothing and accessories (50%), and electronics and appliances (45%) are the industries that are most likely to have shrunk discounts.

The industries most likely to have raised the price of complementary products include automobile (61%), building material, gardening equipment, and supplies (46%), electronics and appliances (45%), and health and personal care (43%).

Businesses are also using pricing tactics such as shrinkflation, increased surcharges, and bundling to drive up prices.

“We’re still in a period of fear and uncertainty about the economy and legislative responses to COVID-19. We can expect unusual pricing tactics for as long as this continues. Some merchants will continue to raise prices out of fear, while others will take advantage of their customers’ fears to realize higher profit margins. When the Zeitgeist of our time returns to baseline, so too will merchants in their pricing methodologies,” says Consorte.

Methodology

All data found within this report was derived from a survey commissioned by Digital.com and conducted online by survey platform Pollfish. In total, 1,000 U.S. retail business owners and executives were surveyed. Appropriate respondents were found via a screening question. To qualify for the survey, each respondent had to own a retail business or be an employed executive at a retail business. This survey was conducted on November 18, 2021. All respondents were asked to answer all questions truthfully and to the best of their abilities. For full survey results, please email julia@digital.com.

This article originally appeared here. Republished with permission. 

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Archives, Global Logistics, Global Trade Daily, International Trade

Lessons from Retailers that are Thriving Despite the Pandemic

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While many retailers are struggling, there are those that are thriving during the biggest period of change in most of our lifetimes. Apple’s Steve Jobs said that “innovation is the ability to see change as an opportunity and not as a threat”, so what lessons can we learn from retailers that are innovating and thriving?

1. Digital

As brick and mortar retailing ground to a halt for many, digital became a lifeline. It’s a good start to have a transactional shopping website but it’s not enough to thrive in most markets. You need to provide a smooth digital customer experience – the site must be simple to use, easy to pay, and provide relevant order progress updates. It needs to go further and bring your brand experience to life so customers can see the same values and priorities are at play in both your physical and digital worlds. Then, layer on an integrated social media approach to bind everything together and keep a close connection with your customers that drives sales. All aspects have to be integrated and telling the same story, so separate teams working in silos can’t deliver the business punch that a well-rounded experience and communication plan provides.

Strong brands with a clear proposition are showing us how to do it, for example, sports retailers including Nike, Adidas, and Foot Locker. With engaging website content that goes beyond the products, stores where there is always something new to see, and integrated social media messaging, they are a great model for any business to learn from.

Amazon has extended its lead in retail during the pandemic by being exactly what customers needed when going to the mall was not an option. Amazon is easy to use, offers a wide product range, and gets your purchases to you quickly. With Prime, they go beyond simple retail models and create multiple connection points with customers’ lives. There’s probably only room for one Amazon in the market, yet you can take the lessons from their success and translate them for your own brand. How do you build a tribe of loyalists? How can the customer journey and delivery be made simple and on-brand?

2. What’s your story?

Having a clear proposition and strong customer offer has never mattered more. Clarity on what you stand for makes it easier to have a consistent story across all your customer touchpoints. And don’t forget that it’s always been important to offer customers the right products and services to drive sales. The enduring demand for Apple’s must-have products made their stores a retail destination, with queues outside the door as soon as they were able to open. Are your products compelling enough for customers to make a journey to shop for them?

3. Meet customers where they want to be

In the UK, successful brick and mortar retailers enduring falling footfall have partnered with third party food distributors, like Uber Eats and Deliveroo, to give them a new and easy route to customers. In the US, Target-owned Shipt gives members same-day delivery from a range of local retailers via their app. For the retailers, it’s a clever approach that gives them a new fulfillment route with almost zero effort to set up.

Disney has been innovative in how they reach customers. The timely launch of their Disney+ streaming service has given them a new route for film releases like Mulan, as well as a captive audience of people based at home looking for new content. In early August Disney CEO Bob Chapek reported that Disney+ had over 60.5 million global subscribers; an impressive number given that they launched less than 12 months ago. You don’t have to go as big as Disney, however. My local bakery set up online ordering within a week and started a fresh-baked bread home delivery service with a trailer attached to a bike. They used social media to encourage regular customers to support them by ordering online and provided easy links to start ordering.

What innovative route to customers could be right for your customers and brand?

4. Keep trading

One of the biggest lessons comes from retailers who were able to keep trading because their food offer meant they were able to sell the rest of their ranges too, for example, Target in the US and B&M in the UK. Being labeled an “essential retailer” in the UK meant keeping your stores open and brick and mortar sales coming in. These stores saw an online surge and kept some physical sales too, meaning they had a stronger sales base to help them weather the storm. If the government orders you to close, you have little choice yet if you can find ways to keep trading and stay part of your customers’ lives it is much easier to bounce back. If you shut up shop for even a short while you can quickly lose relevance for your customers, a hard lesson many apparel retailers are struggling with now.

5. Review your efficiency

Retailers who have thrived have been flexible and responsive to change. As the routines of daily life have been turned upside down, new customer shopping patterns have made previous ways of working and colleague rotas outdated. You need to review your operation and make it efficient for the new realities of trading. The best operators use workload models and workforce management systems to calculate the resources they need now and alter shift plans to fit the changed demand. Don’t stick with the way you used to do things, or you’ll spend too much salary budget when it’s quiet and not have enough colleagues available in the busier spells. If you haven’t got a workload model that calculates the hours you need, get one as soon as you can as it will help manage your all-important cash flow. If you wait until things get back to “normal” to put robust workload planning in place, you could be waiting a long time and mismanage your salary investment in the meantime.

In a world of constant change, thriving retailers make constant readjustments and it does feel uncomfortable. The fittest thrive, so make sure your operational core is working well and flexible enough to cope with the demands that variable business levels will throw at it.

_________________________________________________________________

Article by Simon Hedaux, founder and CEO of Rethink Productivity, a world-leading productivity partner that helps businesses to drive efficiency, boost productivity, and optimize budgets. For more information see https://rethinkproductivity.co.uk/

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Archives, Commentary, Global Trade Daily

How A Hybrid Model Can Help Retailers Survive The Online-Shopping Trend

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With shoppers finding much of what they want online, the future of the brick-and-mortar store can seem bleak.

Such major retailers as J.C. Penney, Lowe’s, Gap and Family Dollar, among many others, have announced plans to close at least some stores across the United States this year.

Is it possible, though, that an answer for what’s troubling retailers these days could be a hybrid model that marries digital with an in-store experience? Already some are trying such an approach, as when Amazon opened a Black Friday pop-up store in Madrid where customers could browse, scan the QR code to learn more about any item that drew their interest, and instantly make a purchase online.

“This no-pressure concept is becoming increasingly popular as today’s customer strongly rejects any hard-sell tactics,” says J.J. Delgado (www.jjdelgado.xyz), a former Amazon marketing manager in Europe who led the largest sales day in the company’s history.

“Instead, they favor an environment that allows them to make their own choices based on all the information that is available to them.”

Retailers have been facing a sea change in their customers’ shopping habits for some time now. A recent Harvard Business Review article pointed out that some stores are handling the problem by cutting the number of employees and reducing the amount of training they give employees. But the three Wharton School of Business professors who wrote the article conclude that approach is counterproductive.

In Delgado’s view, retailers can’t waste time lamenting what was. They need to adapt to what is.

“The future of shopping is not in decline, it is evolving,” he says.

Delgado offers a few suggestions on how a hybrid of digital with brick-and-mortar can work for retailers determined to survive in the digital marketplace:

The customer must experience something they can’t online. Shopping has become a multi-sensorial experience that goes much further than a mere retail transaction, Delgado says. It is about replacing the traditional shopping experience and putting the customer at the center of the whole retail process. “The customer wants authenticity and something of real value, not just monetary value but emotional value,” he says.

Store staff must provide the human connection not available online. “That human connection is the store’s trump card and they must play it right,” Delgado says. “Maximizing that connection and combining it with online connectivity is fundamental to creating the ideal hybrid experience.”

Companies must seek innovative ways to manage their new reality. The changing retail landscape is paving the way for deals between manufacturers, retailers and delivery companies to create ‘mashups’ that allow them to combine their strengths and combat their weaknesses, Delgado says.

“Amazon is the main player in this game, as we have seen with their acquisition of Whole Foods Market,” he says, “but many others are following suit.”

One example is the clothing chain Zara. The chain’s London store features interactive mirrors and high-tech facilities, and combines traditional shopping areas with online areas where customers can scan QR codes and make orders that in many cases are instantly delivered to the store on the same day.

“Some see the digital transformation as the cause for store closures, but it’s very possible that this same digital transformation also could provide the solution to retail woes,” Delgado says. “It is clear that we will soon see more hybrid-retail strategies as retailers seek ways of consolidating their online and offline presence to deliver a seamless customer experience.”


About J.J. Delgado

J.J. Delgado, co-author of Think Video: Smart Video Marketing & #Influencing (www.jjdelgado.xyz), is a professional speaker and digital-marketing expert. He is a former employee of Amazon who led the largest international-sales day in the company’s history. In addition, he was recognized as one of the Top 15 unofficial LinkedIn influencers of 2018. He has helped drive the growth of many organizations, including Amazon, Burger King, Pepsi, Hertz, Ford, Liberty Mutual and others.












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Archives, Commentary, Global Trade Daily

What Buying Habits Tell Marketers About Each Generation

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Each generation has unique experiences, lifestyles, and demographics that influence their buying behaviors, financial experts say. And studies show these distinguishing factors often lead to different spending habits between generations.
As a result, many companies are reaching out to consumers and trying to understand — and gain the attention of — these diverse buyers, says Gui Costin (www.guicostin.com), an entrepreneur, consultant and author of Millennials Are Not Aliens.
“This type of multi-generational marketing is the practice of appealing to the unique needs and behaviors of individuals within different generational groups,” says Costin. “In terms of finding and retaining buyers, companies cannot underestimate those generational differences.”
Costin discusses how the buying habits of different generations are influenced by environmental factors and how businesses must focus their marketing efforts accordingly:
Millennials. Now comprising the highest percentage of the workforce, this generation (born roughly from 1981 to 1995) receives considerable marketing attention. Many millennials grew up immersed in the digital world — a big difference from previous generations — and they think globally. “Attract this group early and earn its loyalty by appealing to their belief that they can make the future better,” Costin says. “Traditional mass marketing approaches do not work well with younger consumers. Be sure they know that your organization’s mission speaks to a purpose greater than the bottom line, e.g., globalization and climate change. Give them systematic feedback because they value positive reinforcement at accelerated rates and want more input.” 
Generation X. Following the baby boomers and preceding the millennials, their tastes are different from previous generations. “Because they have greater financial restraints, they often shop at value-oriented retailers,” Costin says. “On the other hand, they have a reputation of being incredibly disloyal to brands and companies. Generation Xers like initiatives that will make things more useful and practical. They demand trust to the extent that if your organization does not follow through once, then you are likely to lose them.”
Baby Boomers. This demographic group, with many now in retirement or nearing it, includes those born from 1946 to 1964. Health is a major concern, and change is not something they embrace. “They appreciate options and want quick fixes that require little change and instant improvement,” Costin says. “They do not like bureaucracy — but give them a cause to fight for and they will give their all. Focus on building value and they will be less price-sensitive. While this group may be aging, they’re focused on breaking the mold of what 60 and beyond looks like.” 
The Silent Generation. Born between 1925 and 1945, this group represents the oldest Americans and, Costin says, typically is labeled with traditional values such as discipline, self-denial, hard work, conformity, and financial conservatism. “It’s important to earn their trust,” says Costin, “as they believe that a person’s word is his or her bond. Patriotism, team-building, and sacrifice for the common good are appealing to this generation. As a group, they aren’t particularly interested in the information age; however, the younger members of this generation are one of the fastest-growing groups of internet users.”
“Communicating with customers in different generations can be challenging,” Costin says. “However, all generations appreciate honesty and authenticity. As environmental factors change, transparency and genuine interactions remain important to everyone.”

Gui Costin (www.guicostin.com), author of the No. 1 Bestseller Millennials Are Not Aliens, is an entrepreneur, and founder of Dakota, a company that sells and markets institutional investment strategies. Dakota is also the creator of two software products: Draft, a database that contains a highly curated group of qualified institutional investors; and Stage, a content platform built for institutional due diligence analysts where they can learn an in-depth amount about a variety of investment strategies without having to initially talk to someone. Dakota’s mission is to level the playing field for boutique investment managers so they can compete with bigger, more well-resourced investment firms.