How To Cope With Price Inflation As A Pinoy Business Owner

August 4, 2022

Things are almost back to normal, but after a series of lockdowns that disrupted the supply chain and drove many consumers into panic buying, a new burden is on the horizon – the relentless price inflation. This time around, inflation isn’t even the main culprit, it’s a global phenomenon driven by various factors due to the consumer market’s post-pandemic reflexes.

Aside from the inflation rate which hit a 40-month high in July 2022, gasoline prices also continue to pump on a weekly basis affecting local produce. Due to these factors and other existing global phenomena driving prices upwards, the average Pinoy could barely keep up.

As business owners, you wouldn’t want to add to the burden that your customers are already facing, so what should you do? There isn’t really a grand solution to this global crisis, but there are some steps you can take to cushion price inflation and keep your prices as they are!

Reduce the assortment in your main categories

Category resets a low effort high impact strategy for retailers to avoid fully passing on inflation to their customers. How does this work?

Make options for customers simpler. Eliminate identical products that meet the same buyer’s needs, focusing on choice rather than depth.
Recognize which products can be safely removed from the marketplace without sacrificing revenue. Most retailers have learned from the pandemic that they don’t need as many products in their assortment; a study showed that 20% of the assortment can be delisted without negatively affecting customers or business results (and, in fact, toward actually improving sales and profits)
Given the numerous competing and interchangeable brands, optimizing the range frequently boosts negotiation leverage in favor of lowering the cost of goods.

Optimize your inventory

This will let you free up working capital and let you spend it on stocks that matter most.

Recognize the ranges that can be improved to decrease inventory and free up working capital.
Recognize the areas where availability and stock level flexibility are truly important so that your business can concentrate on the proper categories and items.
Create novel products and private-label goods that are reasonably priced and take into account the needs that your market hasn’t fulfilled.

Get more local brands into your basket

Local product availability and presence is a practical way to combat inflation, with advantages going beyond a lower overall basket price at the register.

First of all, a large selection of locally labeled products can aid in promoting better value in your assortment and your brand as a whole.
Additionally, even if a consumer finally decides to buy a branded product, being aware of a better value alternative can have a favorable effect on attitude, particularly in periods of inflation.
A study from Kantar has revealed that 60% of Filipinos prefer to patronize homegrown Fast-Moving Consumer Goods (FMCG) over imported goods, which is why local brands still continue to thrive in this market.

Simplify promotions

It’s not uncommon for businesses to run a variety of promotions simultaneously, including percentage discounts, flat cents reductions, buy one get one free (BOGOF), multi-buys, multi-saves, and conditional discounts. Doing this can add confusion to your customers, and it makes inventory more complex to some extent and could cost businesses more than they realize.

The best practice is to only offer 3-4 types of promotions. The goal is to not just reduce your cost, but also to simplify your promotions. For customers, this will improve their value perception of your business.
Multi-buy promotions need to be executed wisely when there is inflation. BOGOF offers may significantly impact stock availability, adding to the burden on already difficult supply chain issues.

Remove long tail of promotions that do not have a clear benefit to your business or your customers. As mentioned above, keep things as simple as possible.
To increase frequency and spending, use personalized offers and targeted promotions. This is where customer loyalty programs come into play.

Adjust product packaging

This is another path towards becoming more sustainable and cutting down on your business expenses. Ikea for one saved $1.4 million just by optimizing its packaging for its sofa. Aside from saving money, there are various benefits to rethinking your overall packaging:

Reduce shipping costs. If your packaging takes up too much space, it might cost more than it should! By trimming down your packaging as a whole, depending on the dimension and size of your product, shipping costs would also go down. This is assuming you also sell online.
More extra space on your storage or shelf. This may not mean a lot but those extra spaces could also mean extra costs for you. If you’re selling huge items, you may need to rent out extra space. Extra space means extra cost!

Implement a loyalty reward program

While attracting new customers is important for business growth, so is customer retention. You can maintain a consistent revenue stream by incentivizing customers to continue purchasing your products and services. Offering customer loyalty programs is one way to encourage your customers to do business with you again without increasing your marketing cost.

Build reputation. Creating a customer loyalty program that offers great deals and rewards can help you improve the reputation of your business. You can target people who shop to save money and show them how much you appreciate their support. Customers may be more favorable toward your business if they believe it provides value. Making these positive associations in people’s minds can make them feel good about shopping with you.
Set benchmarks for your customer metrics. Creating a loyalty program allows you to keep track of your customers’ purchases and spending habits more easily. These are valuable information that can help you develop better marketing strategies and promotions. The data you collect can also assist you in learning more about your target audience. For example, asking customers for their addresses and birthdays can assist you in determining which locations and ages to target.
A loyalty program, like consistent marketing, can help keep your brand relevant without spending on actual marketing. You can remind your customers to shop with you by providing them with updates on their current reward status. Similarly, when a new customer purchases from you, asking them to join a reward program keeps them in your sales funnel. This makes it easier to contact them and remind them of all the wonderful products and services you provide.

Digitize your business

There are various ways to digitize a business. One is to make it easily accessible online by setting up an online counterpart of your store, where customers don’t need to drive to your physical store to purchase what they need. For some businesses, this is a cost-effective way to cut down their rental costs, retailers don’t need a bigger space to display their products, offsetting major operating expenses.

On the other hand, another way to digitize your business is by integrating it with a modern-day digital POS system that can be used with a tablet or a computer. It’s a cashier with more advanced features that lets you check out your customers’ purchases, manage and oversee your inventory with just a few clicks, supervise your staff, generate sales report instantly, etc.

Digitizing your business with a POS like StoreHub will not only make your business efficient without the extra manpower, but it will also make the shopping or dining experience of your customers more seamless and help you optimize your operations cost easily.