Companies struggle to sell as inflation takes hold
In 2021, the economy boomed. Consumers had accumulated vast savings during the 2020 lockdowns and furlough schemes and were ready to spend.
At the start of 2022, that had all but fizzled out. Furthermore, inflation really began to bite as the effects of supply chain disruption, lockdowns, and government cash handouts took effect.
The latter half of this year is going to be a particularly testing time for British firms, according to think tanks. Consumer sentiment is near all-time lows, and many people are wondering where their next meal is going to come from.
Once the fourth quarter arrives, things look destined to get even more serious. Energy prices will go up again in October, forcing people to cut back further on discretionary spending and save whatever money they can. And food will become more expensive, too.
Companies are grappling with what to do next. With the consumer so weak, old business models are no longer effective. Firms must develop new strategies that cater to the consumer, as they are right now.
One method is to change their marketing approach. Digital outreach expert, Joey Armstrong has some advice. He believes that firms should be seeking alternative channels to communicate with customers, such as Reddit.
In the current environment, posting on Reddit makes a lot of sense. The platform is already replete with people venting about the cost of living crisis and looking for solutions. Companies that get mentions on popular threads can expand their audience and capitalise on the situation.
Brands are also looking for ways to help consumers beat inflation. They can’t do much to change input costs, but they are slimming down their business models and looking for ways to give customers more for their hard-earned money.
For instance, many are using non-price levers. They are looking for ways to make themselves more appealing to customers that don’t impact the price of the goods they sell.
Others are segmenting their markets instead of applying one-size-fits-all policies. For instance, they are adding surcharges to customers who want fast delivery or quick service, helping others who are prepared to wait to pay less.
Firms are also looking to reduce costs through non-conventional means. For instance, making changes to product design or packaging could help to shave a few percent off the price to counteract the effects of general inflation.
Of course, no matter what companies do, there will be some reduction in demand. The fact that so many people took time off work in 2020 because of the pandemic is now causing inevitable economic upheaval. Inflation is the price being paid for earlier policy decisions, and it will lead to market failures.
However, every crisis is also an opportunity. And there are plenty of companies lined up to be successful, even in an inflationary environment. Companies that can convince consumers that they are doing everything they can to fight inflation automatically put themselves at an advantage versus the competition.
Selling will likely get harder as 2022 rolls on, so firms are preparing now for lower volumes. Cutting back will be critical for survival.