{"id":8444,"date":"2023-06-13T11:51:38","date_gmt":"2023-06-13T11:51:38","guid":{"rendered":"https:\/\/www.brightpearl.com\/?p=8444"},"modified":"2023-06-13T11:51:38","modified_gmt":"2023-06-13T11:51:38","slug":"e-commerce-businesses-can-fight-inflation-heres-how","status":"publish","type":"post","link":"https:\/\/www.brightpearl.com\/blog\/e-commerce-businesses-can-fight-inflation-heres-how","title":{"rendered":"E-commerce Businesses Can Fight Inflation – Here\u2019s How"},"content":{"rendered":"

Consumers continue tightening their belts as the cost of living crisis bites. And the outlook isn\u2019t ideal; UK inflation remains stubbornly high, especially compared to the Eurozone and the US.<\/span><\/p>\n

The cost-of-living crisis, combined with the rising cost of raw materials, packaging, transport and labour, is putting insurmountable pressure on retailers and increasingly price-conscious consumers.\u00a0<\/span><\/p>\n

Many e-commerce businesses, especially those operating in the last decade, were set up on high-growth, low-profit models after years of cheap lending. Now, the glory days of rapid growth are over and they\u2019re left struggling against ratcheting borrowing costs, as interest rates creep up and capital becomes more expensive.\u00a0<\/span><\/p>\n

\u201cThe era of being rewarded for hyper growth at any cost is quickly coming to an end,\u201d US venture capital firm, Sequoia Capital, warned in an advisory note to its portfolio companies this month.\u00a0<\/span><\/p>\n

But is it all doom and gloom? Thankfully not. There are several strategies that e-commerce firms can use to fight inflation and stay profitable:<\/span><\/p>\n

Increase Operational Efficiency<\/b><\/p>\n

In the battle against inflation, improving operational efficiency is key. By leveraging technology like <\/span>retail automation software<\/span><\/a>, inventory management<\/a> or planning systems, and order management<\/a> platforms, e-commerce firms can streamline their business processes and reduce costs. This can offset the impact of inflation.\u00a0<\/span><\/p>\n

“<\/span>We’ve invested heavily in automation, which has allowed us to reduce our operational costs and save time,\u201d says Jorge Henriques, COO, <\/span>Bond Touch<\/span><\/a>, who manufacture unique touch bracelets.\u00a0<\/span><\/p>\n

\u201c<\/span>Automating tasks like order processing, shipping, and inventory management has saved us three full time hires \u2013 equating to around 120 hours a week, or 480 hours a month.\u201d<\/span><\/p>\n

Mark Hook, VP of Global Brand Marketing at <\/span>Brightpearl<\/span><\/a>, agrees with <\/span>\u00a0Henriques<\/span> assessment and says that e-commerce brands must rethink their approach to operations to fight inflation.<\/span><\/p>\n

He says: \u201cWhen sales slow, it can expose e-commerce business models, which are reliant on high volume, but low margin.<\/span><\/p>\n

\u201cTo survive, they should focus on <\/span>automating<\/span><\/a> everything from order fulfilment and returns, to inventory management, shipping and accounting. Automation can have a significant impact on overheads. It\u2019s the best way to reduce costs at pace.<\/span>\u201d<\/span><\/p>\n

Businesses can also improve efficiency by using technology that grants them greater visibility into their stock levels, so they can make more informed purchasing decisions.<\/span><\/p>\n

Jill Liliedahl, Product Marketing Director at our sister company <\/span>Inventory Planner by Sage<\/span><\/a> explains why this is essential: \u201cGaining more visibility over inventory can help e-commerce businesses avoid overspending and overstocking items that can decrease in value as inflation rises, while also ensuring that they have enough inventory to meet future demand.\u201d<\/span><\/p>\n

Implement Strategic Pricing<\/b><\/p>\n

In addition to managing their inventory more efficiently, e-commerce firms can also strategically increase prices. While this may seem counterintuitive, it can actually be a smart move during times of inflation.\u00a0<\/span><\/p>\n

By raising prices slightly, businesses can offset the increased costs of goods and maintain their profit margins without scaring off customers.<\/span><\/p>\n

However, it’s important to approach price increases with care. Too large a price increase can lead to customers switching to competitors, which can be damaging in the long term.\u00a0<\/span><\/p>\n

According to Hook: “Adjusting pricing can be an effective way to maintain margins during periods of inflation. However, it is essential that you don\u2019t scare off customers with overly aggressive pricing.”<\/span><\/p>\n

Strategic pricing can include targeted price increases,\u00a0 adapting prices for particular products and different customer segments.\u00a0 Although the costs of your supplies may be rising, that doesn\u2019t necessarily mean that all your product prices should increase.\u00a0<\/span><\/p>\n

“Inflationary cycles are actually a good time to test consumer price sensitivity across your different products and categories, ” says <\/span>Josh Vervack, Director of Finance and Analytics, Tomorrow.<\/span><\/p>\n

\u201cIncreasing your price by 5% may tank your conversion rate in one product category but have no impact on your conversion rate in another category. Keep the price increases that don\u2019t impact <\/span>conversion rate heavily, and recapture lost profits on rising unit costs.\u201d<\/span><\/p>\n

Tony Preedy, managing director of global marketplace Fruugo, says it\u2019s crucial that online retailers measure, understand and manage unit economics to overcome rising inflationary pressures.\u00a0<\/span><\/p>\n

\u201cUltimately, businesses are going to have to make trade-offs between profit now and growth later, so it\u2019s important for them to analyse their data closely,\u201d he says. \u201cRising costs are likely to cause retailers to put up their prices in the short to medium term. However, online retailers can adapt how they price to optimise how they sell through their inventory, and they can be cute about how they target discounts to prompt a purchase.\u201d<\/span><\/p>\n

Whatever the pricing strategy, it\u2019s important to effectively communicate the reasons behind the decision to customers, who are equally affected by\u00a0 inflation.<\/span><\/p>\n

Focus on Product Diversification<\/b><\/p>\n

Another strategy that e-commerce firms can use to fight inflation is diversifying their product offerings. By offering a wide range of products, businesses can offset the impact of inflation on individual items. This can minimize the impact of inflation on the overall profitability of the business.<\/span><\/p>\n

By expanding their range of products, businesses can also be better positioned to tap into new markets and potentially reach a wider range of customers.<\/span><\/p>\n

Finally, e-commerce firms can also consider offering discounts, promotions and loyalty initiatives to attract and retain customers as a potential way to boost sales and generate more revenue in the long term.\u00a0<\/span><\/p>\n

However, discounting is a strategy that needs to be deployed with caution, as <\/span>Danielle Malconian, Founder of plus-size fashion brand <\/span>Vikki Vi<\/span><\/a> warns: \u201cThe more you discount, the more customers expect discounts. They aren\u2019t going to buy at full price if you keep giving them 40% off.\u201d<\/span><\/p>\n

Preedy agrees, and warns about a strategy of indiscriminate discounting to drive volume. \u201cVery few businesses properly calculate the impact on gross margin of reduced prices and the massive growth in units required to keep income stable, never mind growing,\u201d he says.<\/span><\/p>\n

Hook says adding value for existing customers is now essential to fight the effects of inflation.\u00a0<\/span><\/p>\n

\u201cFocus on what consumers want most and prioritise convenience, exceptional experiences, and value. Every brand should be concentrating on retaining and strengthening their relationships with their existing customers using expanded product offerings, exclusive offers, loyalty programs or member-only promotions and events. These incentives, combined with superior customer experience that\u2019s built around top-notch technology, can give brands the advantage they need to come out the other side of this crisis stronger.\u201d<\/span><\/p>\n

In conclusion\u00a0<\/b><\/p>\n

E-commerce firms can take a number of steps to fight inflation and maintain their profit margins. By focusing on inventory, pricing, product offerings, and their operations, businesses can weather the storm of inflation and remain competitive.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Consumers continue tightening their belts as the cost of living crisis bites. And the outlook isn\u2019t ideal; UK inflation remains stubbornly high, especially compared to the Eurozone and the US. The cost-of-living crisis, combined with the rising cost of raw materials, packaging, transport and labour, is putting insurmountable pressure on retailers and increasingly price-conscious consumers.\u00a0 […]<\/p>\n","protected":false},"author":17,"featured_media":8445,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-8444","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nE-commerce Businesses Can Fight Inflation - Here\u2019s How - Brightpearl<\/title>\n<meta name=\"description\" content=\"Consumers continue tightening their belts as the cost of living crisis bites. 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