You’ve heard the news about – and felt the pinch of – rising inflation rates. According to the U.S. Labor Department’s latest data release on August 10, the annual inflation rate is 8.5% for the 12 months ending July 2022 after rising 9.1% previously — the largest annual increase since November 1981. But even that number looks conservative when compared to some of the categories that are feeling the hit even more so than the national average. According to Forbes, food prices, for example, are up 10.4% compared to last year and energy prices have risen 41.6% in the past year.
A number of factors are contributing to inflation for retailers. McKinsey cites a jump in commodity prices after the Russian invasion of Ukraine, as well as supply-demand imbalances from pandemic-driven shifts in consumer spending, as primary motivators. As a result, costs to retailers are increasing across the board, especially those related to manufacturing inputs, freight, fuel and wages. Plus, ecommerce now constitutes nearly 13% of all sales, where retail margin is weaker.
Retailers brace for impact
As retailers continue to struggle with the effects of inflation, earnings are down and prices are up.
- 59% of the 79 large retailers that reported earnings April 1-May 23 disclosed a decline in revenue estimates for 2023
- 71% saw a decrease in estimates for 2023 earnings before interest, taxes, depreciation and amortization
- 24.1% decline to the S&P Retail Composite Index during the same time period—nearly twice the decline of the S&P 500 over the same period
Consumers are shifting their loyalty
How are consumers responding to the rise in costs? When evaluating consumer spending behavior, numbers can be deceiving. Across categories, consumers are paying more but consuming less, including grocery, gasoline, travel and restaurants.
Loyalty was already in flux post-pandemic, and the trend continues to heat up thanks to inflation. In a recent survey conducted by McKinsey, price was a top motivator for switching brands and retailers in 2022 and 90% of respondents indicated they noticed prices going up. But consumers aren’t just aware. They’re taking action: in another survey completed by Inmar Intelligence, 66% of shoppers considered purchasing a grocery product from a different brand because of rising prices, and 70% actually purchased from an alternate brand.
You can still turn the challenges of inflation into opportunity
The situation for retailers is tough, but not hopeless. A holistic approach that addresses a variety of factors contributing to pricing challenges can make a meaningful impact on future earnings and long-term resilience. For example, retailers should consider shoring up end-to-end visibility across the supply chain and diversifying suppliers and carriers to ensure optimal pricing and resiliency.
Personalization is also a key strategy for winning and retaining customer loyalty. More specifically, targeted digital incentives could make or break your customers’ purchasing decisions moving forward, and there’s data to back it up. When a shopper’s preferred brand offers a coupon, but another brand offers a marginally lower price, 61% will still purchase their preferred brand.
But do you have the data?
Connecting the right message to the right customers can preserve loyalty—but it takes data to seal the deal. Typically, retailers with brick-and-mortar presence struggle to identify and engage their customers, and rely their on loyalty programs to bring in customer intelligence. But given the changing attitudes toward brand loyalty in the past year, retailer’ loyalty data may no longer reflect your customer base.
Plus, on average, retailers only manage to get 5-15% of customers to sign-up for such programs – leaving the vast majority of customers unknown, not understood, and unreachable. If you’re struggling with unknown customers, the right customer data platform (CDP) can enhance and enrich your existing customer data.
Activate the right audience with Bridg
Using Point of Sales (POS) data, bank transaction data and Bridg’s proprietary census of offline identity and behavior, we help retailers identify previously unknown individuals behind a credit/debit card transaction. We build unified, privacy-safe profiles of loyalty and non-loyalty customers with SKU-level purchase history and hundreds of enriching demographics, socioeconomic and lifestyle attributes that can be used to power analytics or targeted marketing.
As a result, retailers can activate the right audiences, reach them in a relevant way via various digital channels (directly from our UI!) and measure performance—no matter how volatile the market.
To get started on more impactful insights and personalization, connect with us today!