Have you ever gone to the store, looked at an item's price tag, and thought "What in the world is this?"
It seems like prices are going up exponentially every day, and it's hard to keep track of just how much things are costing us.
According to the IMF, global inflation is predicted to rise from 4.7% in 2021 to 8.8% in 2022 – and we’re definitely feeling inflation hitting us hard right now.
But what does this mean for the average consumer? As prices are rising, people are forced to adjust their shopping habits in order to manage their budgets.
In this blog post, we’re going to outline what inflation is, how it's influencing our spending habits and businesses right now, and end with some solutions to help your eCommerce store continue to thrive.
What Is Inflation and How Does It Impact the Average Person's Life?
Inflation is an economic term used to describe the general rise in price for goods and services over time. It's a natural occurrence when economies are growing, and it can either be caused by demand outstripping supply or by governments printing money and injecting more of it into the economy.
Inflation affects us all, as it directly impacts our cost of living. Shipping costs, for instance, have been on the rise due to inflation, making goods from outside sources significantly more expensive.
There are many reasons for the current global inflation crisis, such as a decreased supply of goods worldwide, the Russia-Ukraine conflict, and rising crude oil prices (used by almost every industry).
It shows how connected our world is when a crisis on the other side of the globe is felt down at your local grocery store.
According to Statistics Canada, the consumer price index (CPI) has risen 6.9% in the past year (almost double the previous year!). With the increased price of goods and services, many people are left with a decrease in their purchasing power and in their ability to save money.
It's safe to say that as long as inflation continues to rise, our spending habits will be impacted in a big way – but you can still grow your store in uncertain economic times.
How Inflation Has Caused People to Change Their Spending Habits
Overall, inflation has caused people to be more mindful of their spending habits. People are now more cautious about what they buy, where they buy it from, and how much they spend on it.
Many are looking for ways to save money and stretch their dollars further, such as opting for generic brands or buying in bulk. According to Forbes, nearly a third of Americans (28.6%) said that they’d only purchase gifts that are on sale this year.
People are also seeking out discounts and deals wherever possible, which can help reduce the overall cost of goods and services. This is especially true when there's an increase in shipping cost price due to the effect of inflationary pressures.
By keeping this in mind, you can position your store’s products in a way that will help customers always feel like they’re getting a good deal on whatever they’re buying.
How Inflation Is Impacting eCommerce Businesses
Shipping companies are also raising rates due to increased demand from online shoppers, so this is something that businesses need to take into account when pricing their products.
The increase in inflation is causing businesses to rethink their strategies and find ways to remain competitive. Shipping costs have been on the rise due to inflation, which has put added pressure on eCommerce companies that are already dealing with higher operational costs.
A large majority of retailers have claimed to be feeling the pressure, with almost 80% reporting they have been affected in some way or another over the past six months.
However, while rising inflation isn’t ideal, there are still many ways to keep your eCommerce business thriving through these challenging times.
The Different Ways That Businesses Are Adapting to These Changes
Businesses have always had to adapt to change, but the COVID-19 pandemic and its lingering economic effects have presented unique challenges.
Many businesses have had to offset rising costs by raising prices or charging for shipping.
However, there are other ways that businesses can offset these costs without passing them directly onto consumers. Here are just a few that eCommerce businesses are using today:
Offer Subscription Services
Subscription services allow businesses to spread out their investment across multiple orders, as customers pay a subscription fee rather than a one-time fee for each order. This helps offset the rising shipping costs for businesses and makes it more affordable for customers!
Offer Loyalty Programs
Businesses are also offering loyalty programs to adapt to inflation-driven market changes. This provides customers with an incentive to keep shopping with your store and rewards your customers for their purchases! Customers are looking for discounts, and loyalty programs give them that but also ensure they keep coming back to your business.
Optimize Marketing Budgets
eCommerce businesses can also optimize their marketing budget and allocate more funds towards promotions that drive customers to their stores. By properly positioning your offers during this inflationary period, it will help you generate more sales and offset the rising costs as well.
Businesses will want to track their return on investment for each marketing campaign to analyze what is and isn’t working. During trying times, it’s important to get back to the basics and make sure that nothing is slipping through the cracks. You don’t need us to tell you, but if it costs you more to acquire a new customer compared to what you’ll earn over the lifetime of that customer, then you need to reevaluate your acquisition strategy. Just like your customers, you want to be spending your money wisely.
Fine-tuning your marketing strategy can help ensure your business continues to succeed through this period of rising costs.
As we have mentioned, due to inflation, shipping costs have continued to rise as well. Fortunately, there are some solutions for eCommerce businesses looking to mitigate these effects.
- Working with a 3PL partner to get better shipping cost rates with carriers
- Offering free or minimal shipping cost options
- Utilizing drop shipping services
By taking these steps, businesses can remain competitive while also providing their customers with good value.
Inflation is continuing to rise and is impacting each and every one of us. In the eCommerce industry, in particular, it’s more important than ever to be strategic about how you offset the costs of doing business.
You have to adapt and change along with these uncertain economic times. Implementing some or all of the strategies we’ve outlined should help your bottom line, all while keeping your customers happy.
Take action today!