For the past several years, consumers around the world have complained about rising prices on everyday items – from gas to clothes to eggs. However, many consumers fail to see how these price increases are the result of issues that have ripple effects across industries.
However, some companies have responded to these challenges with innovative solutions that allow them to grow despite global supply chain slowdowns. In the year To avoid similar issues in 2023, businesses must take extra precautions to ensure their products – and their consumers – thrive.
The crisis that the industry is now facing
In the year 2022 is shaping up to be a particularly challenging year for consumers, with unprecedented inflation leading to significant increases in the cost of consumer goods. But it’s not just individual consumers who are affected – businesses are also starting to face challenges due to rising costs of raw materials and shipping processes.
At the same time, businesses are dealing with supply chain issues, ranging from shortages of certain items to low staffing levels. This created a supply chain crisis that many industries are still struggling with, causing consumers to stockpile levels. Some products have become commoditized due to low demand and low supply, forcing disadvantaged consumers to pay hugely inflated prices.
Why cutting costs is better than raising prices.
Unfortunately, in these economic conditions, businesses face an unfortunate dilemma. Rising raw material and shipping costs can significantly reduce a company’s bottom line, but rising prices can come at a cost.
“As consumers become more cost-conscious, raising prices can mean losing part of your customer base,” said Robert Felder, founder and CEO of Barebottom Apparel. “However, a business must weigh the potential benefits of not raising prices against the potential losses. The goal is to find a way to offer your product to your customers at a competitive price and still allow your business to grow.
Businesses can find other ways besides increasing prices to increase their margins, such as by cutting costs. Felder suggests making operations more efficient to help cut overhead costs. “We’ve optimized the size of our bulk cartons to better utilize the physical space in a 40-foot container,” he explains. “As a result of these changes, we have reduced our container utilization rate to nearly 97%, resulting in nearly zero wasted space. The reduction in shipping cost per unit is significant.”
Felder suggests businesses work with their shipping partners to find low-cost and efficient shipping methods. “We’ve seen great success moving orders to smaller ports closer to their final destination,” he said. Although this adds some transit time to water, we’ve seen up to a 30% price reduction in some cases. These savings can be passed on to the customer.
Since the shipping process can generate large amounts of greenhouse gas emissions, improving shipping has the added benefit of reducing a company’s carbon footprint. Currently, companies are becoming more responsible for the negative impact they have on the environment, because consumers are more concerned about the sustainability of the products they buy, and ecological compatibility is their purchasing decision. As such, improving the shipping process not only saves money, but also appeals to customers.
How helping the customer helps the business
Felder wants to remind businesses that helping their customers is helping themselves. “Ultimately, our goal is to help our customers during this ever-increasing price period,” he asserted. “If we can keep our prices stable and continue to offer great value, consumers will continue to buy our products. Finding ways to reduce costs anywhere – even in small ways – is critical to keeping customers coming back.”
Many businesses have struggled to recover from unprecedented inflation and a supply chain crisis. However, raising prices is not always the solution.
“The businesses that can come out the other side of this situation are those that understand their customers’ needs and adjust their spending to reflect that,” says Felder. “Find creative ways to cut costs and let them reflect in your pricing.”
