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The retail inflation rate in India stood at an eight-year high of 7.79% in April. While the RBI is taking appropriate measures to rein in inflation, these efforts will take time to yield results.
Retailers need to accept this reality and look for ways to manage rising operational costs, optimise supply chains, innovate to increase revenues, and offer an engaging customer experience. Retailers can transform these difficulties into opportunities by making bold and thoughtful decisions. In fact, businesses that do very well during recessions typically outperform their competitors over the ensuing ten years.
Here are five ways in which retailers can ride the inflation wave to their advantage:
- Relook at consumer segments and brand messaging
Re-examine your core customer groups and look for changes in shopping patterns, such as variations in frequency, spending, and quantity bought in these segments. Identify whether customer needs have changed and how this has impacted the loyalty of important customer segments. Then, use this new customer understanding to relook at your customer strategy. Should you categorise customers in new ways, such as value-seeking or price-sensitive? Should you emphasise any brand promise, such as ‘the best rates in town’?
Next, deploy a unified customer data platform that can help understand your consumers at a granular level. Using micro segments, deploy extensive personalisation in messaging. Study the customers’ purchasing history, behavioural data, intent signals and messaging preferences to tailor your messaging accordingly. These timely and relevant messages help maintain customer relationships in difficult economic times, strengthen existing ones, and foster future consumer loyalty.
- Constantly revisit the category strategies
Budgets and product accessibility make consumers more open to experimenting with new brands. For instance, national brands are recognised and generally preferred by consumers, but store-level labels (private brands) can be seen as cheaper alternatives during inflationary times. Retailers will need to reconsider and modify the tactics employed in each category. In times of increased retail inflation, there is a need for strategies that emphasize reduced prices and additional value provided by such products to consumers. This can favourably influence consumer attitudes.Plus, to enhance value perception and reduce costs, replace more expensive branded goods (or products that become unavailable due to commodity shortages) on your shelves with entry-level products from economical suppliers. This simplifies options for customers and increases value perception.
- Use integrated sourcing tools to increase cost visibility, boost purchasing power
Retailers need to determine the true impact of changes in input costs and where they differ from supplier-proposed pricing. Innovative sourcing tools can help in improving cost visibility. This will help retailers establish cost targets for each product, gain real-time visibility into the impact of inflation on end prices, and make quick adjustments where needed.
Retailers must balance anticipated price rises with the cost of financing and carrying extra inventory. They must also take into account the dangers of excessive overstocking and entering into long-term service contracts. Tools using predictive analytics, AI, and ML study previous sales figures along with external data such as macroeconomic factors to forecast demand, supply constraints, and material price increases. This helps businesses prepare for fluctuations and determine the material quantities required for the next few months.
- Rethink store operations to optimise productivity
Look for strategies to increase your store’s productivity and efficiency to offset salary increases. How can you achieve more with fewer workers? Where do you need more skilled people?
By analysing your current in-store processes and taking an end-to-end view of expenses, you can identify opportunities for cost savings and productivity improvement. An easy way to do this? By leveraging automation and technology to handle straightforward data entry chores currently done by retail employees. This helps save the time and effort of employees, letting them focus on more strategic tasks.
Additionally, augmenting physical stores with a digital sales channel for both end consumers and B2B customers and establishing a true omnichannel experience can further enhance productivity and sales.
- Employ end-to-end solutions to enhance supply chain visibility
With in-depth visibility into supply chains, retailers can reorient their supply and distribution networks. This lets them direct shipments through less congested and more affordable ways, locate distribution centres in the most suitable places (that can balance labour and last-mile costs), and take steps to lower distribution overhead.
How can retailers ensure such an optimised supply chain? By leveraging an end-to-end data management tool, which helps monitor every stage of the supply chain, gather relevant data, and organise it in a centralised repository. From there, the data can be reviewed, analysed, and eventually mined for useful information that will enhance business operations and strategic decision-making.
To beat the impact of rising inflation and changes in consumer purchasing patterns, retailers need data and tech-based tools to make sense of this data. Technologies using data and analytics help provide deeper insights through a holistic market view, letting retailers modernise processes, provide better customer experiences and enhance retailer-supplier collaboration.
The author is Senior Director, Solution Engineering at Salesforce.
Disclaimer: The views expressed are solely of the author and ETCIO.com does not necessarily subscribe to it. ETCIO.com shall not be responsible for any damage caused to any person/organization directly or indirectly.
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