The Ebb & Flow of Consumer Behavior
With the rise of e-commerce giant, Amazon, and the shift of consumer behavior to online retail, it’s no wonder brick-and-mortar stores are having to adjust to the competition. Not to mention, e-commerce entities of all shapes and sizes are putting pressure on brick-and-mortar retail operations. One of the more prominent aspects of Amazon’s e-commerce business model is changing prices frequently. Therefore, brick-and-mortar retailers are forced to also apply price changes more often in order to stay competitive. Furthermore, recent research shows the average time period for regular price changes fell from 6.7 months (from 2008 to 2010) to 3.7 months (from 2014 to 2017).
Retail Prices Subject to Price Changes
While many brick-and-mortar retailers are now changing prices more frequently to achieve uniformity with the e-commerce world, this can possibly expose their proverbial “Achilles Heel.” Shifts in supply chain costs—including gas prices, tariffs, and many other variables—can adversely affect retail prices across the board, not to mention dwindle profit margins.
Supply Chain Costs Affect the End Consumer
Additionally, the brick-and-mortar industry has been pushed into a tough spot when faced with price shocks… the most prevalent of late being the tariff war between the U.S. and China. Retailers are challenged with maintaining profit margins, so they 1) end up passing on costs to the end consumer, or 2) sacrifice profit margins to invest in more “behind-the-scenes” supply chain costs.
One solution to maintaining profit margins—while keeping the end consumer happy—is to budget according to the ongoing trend of more frequent price changes. Furthermore, this means incorporating a robust contingency percentage into your supply chain budget to account for unexpected price shocks in the chain. Additionally, the contingency plan should include analyzing more volatile variables in your current supply chain, those most affected by commonly shifting cost variables outside your chain. Understanding the year-over-year trends of supply chain variables and costs will prove highly beneficial in planning your future supply chain and, ultimately, the success of your business.
BM2 Freight Services, Inc.
Phone: (859) 308-5100