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The inflation potential

There it is – inflation. It has come to stay. The evil devil that hits both entrepreneurs and consumers with a reduction in purchasing power and immediately makes many tighten their belts. But how can we cope with the record rate of inflation and the inflation that is here to stay?

1. Adding value instead of administration

Passing on rising raw material, commodity and labor costs to customers who are already struggling with inflation is a critical step. The question arises, “has all internal homework been done?”. What is the company’s cost structure? Which expense are allocated to the product and which to the administration. By means of a fundamental commercial analysis, urgently needed potentials can be identified and utilized. Did you know that due to more efficient processes, online retail has experienced significantly lower inflation than traditional retail? This goes hand in hand with lower sales declines in online retailing compared to brick-and-mortar retailing. The reason for this is the more efficient cost structure of online retail, which scores particularly well in terms of low overhead costs.

2. Direct to Consumer (DTC)

What does the consumer pay for? Which trade margins offer the consumer an advantage due to special services provided by the retailer? The decreasing purchasing power of the consumer causes a higher demand for low-priced alternatives. Here it is important not to reduce the quality of the product but to reduce overhead costs in order to be able to offer attractive prices. In addition, a DTC approach offers the unique opportunity to build a brand exactly according to the exact company values and to present product details via modern media in an exciting and concise way. Moreover, it increases customer proximity abruptly. Short feedback loops regarding customer feedback can be quickly taken into account in product development. Engage an e-commerce expert in your strategy process to consider DTC and other digital opportunities in your business model.

3. Differentiation

The golden mean is fading to gray in the face of high inflation. Above, we have already discussed the improvement of the cost structure as an important lever. But what if the function or quality of the product does not allow for a cheap price strategy? In this case it is essential to differentiate from the competition. Emphasize the unique benefits and be proud on features that only you offer. Generate opportunities for differentiation in your strategy process and encourage product development to that end. You can become a price warrior later!

Remember, inflation is not only a spectre. It’s also the spark that moves us to tackle something new in order to ensure a successful future.

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