For the past several years, consumers around the globe have voiced their complaints about increasing prices on everyday items — from gas to clothes and even eggs. However, many consumers aren’t able to see how these rising prices are a result of issues that have created a ripple effect across virtually every industry.
Nevertheless, some companies have responded to these challenges with innovative solutions that have allowed them to grow despite worldwide supply chain slowdowns. In order to avoid similar issues in 2023, businesses will have to take extra precautions to ensure that their products — and their consumers — remain thriving.
The Crisis The Industry Faces Right Now
2022 proved to be a particularly challenging year for consumers, with an unprecedented rate of inflation causing this substantial increase in the price of consumer goods. But it wasn’t just individual consumers who were affected — businesses also began to experience challenges due to a rise in the cost of raw materials and shipping processes.
At the same time, businesses faced supply chain issues, ranging from shortages of certain items to delays due to low staffing levels. This created a full-on supply chain crisis that several industries are still grappling with, leaving consumers to face dwindling levels of stock. Some products even became commodities, as consumers in need were forced to pay heavily inflated prices to account for higher demand and lower supply.
Why Cutting Costs is Better Than Raising Prices
Unfortunately, amid these economic conditions, businesses face an unfortunate dilemma. The rising cost of raw materials and shipping can cut significantly into the company’s bottom line, but raising prices can also come at a cost.
“With consumers more conscious of their spending, raising prices could mean losing a part of your customer base,” explains Robert Felder, founder and CEO of Bearbottom Clothing. “However, a business must weigh this against the loss of profit they would incur from not raising prices. The goal is to find a way to provide your product at a competitive price for your customer and still allow your business to grow.”
Businesses can also find other ways besides increasing prices to increase their margins, like reducing costs. Felder suggests making operations more efficient to help reduce overhead. “We have optimized our bulk carton sizes to better utilize the physical space available inside a 40-foot container,” he explains. “Due to these changes, we have pushed our container utilization rates to close to 97%, leaving nearly zero wasted space. The reduction in shipping cost per unit is substantial.”
Felder also suggests that businesses work with their shipping partners to find lower-cost and more efficient shipping routes. “We have seen great success routing orders to smaller ports closer to their final destination,” he says. “Although this did add some transit time on the water, we have seen cost reductions by as much as 30% in some cases. These savings can then be passed onto the customer.”
Improving shipping has the added benefit of lessening the company’s carbon footprint since the transportation process can create a significant amount of greenhouse gas emissions. These days, companies are being held more accountable for the negative impact they may have on the environment, as consumers are more concerned about the sustainability of the products they purchase, with eco-friendliness being a factor in their purchasing decisions. As such, improving the shipping process is not only a way to save money but also to appeal to customers.
How Helping The Customer Helps The Business
Felder wants to remind businesses that helping their customers is actually helping themselves. “Ultimately, our goal is to help our customers during this time of constantly rising prices,” he asserts. “If we are able to keep our prices stable and continue to offer great value, consumers will continue to buy our products. Looking for ways to cut costs anywhere — even in small ways — is critical to keep customers coming back.”
Many businesses have struggled to recover in the face of unprecedented rates of inflation and a supply chain crisis the likes of which we have never seen before. Even so, raising prices is not always the solution.
“The businesses that will be able to come out of the other side of this situation are those that can understand the needs of their customers and adjust their expenses to reflect that,” says Felder. “Find creative ways to cut costs, and let them reflect in your prices.”