The figures show a fall in the inflation rate to it actually showing a negative. This means that prices are falling.
Why is this bad news for retailers?
This is particularly bad news for retailers of high price items. The fact is, that if consumers see prices falling they will put off their large purchases in the expectation that prices will continue to fall and they can save money. This effect really starts to kick in when prices fall consistently over a longer period of time. It works more on high ticket products - televisions, cars, gadgets and computers. So if you're a retailer of these items what can you do? The first thought when looking for customers is often price but that seems like the wrong idea on this occasion. Further price cuts can only deepen the feeling that prices will continue to fall. And increasing prices at this point will put you at a disadvantage to your competition.
So the best thing to focus on is the quality of what you sell. Having a quality product can sell no matter what the market is doing. Look at Apple - their products sell in times of inflation or deflation. Now, we can't all come up with an ipod, iPhone or iPad idea to help our retail business but you can focus on the quality in your own business.
Finding what makes you different
As a retailer you will probably already have an idea what it is that makes you different. It's what sets you apart from other retailers and it could be one of many things-
- Your loyalty scheme
- Your products
- Your customer service
- Your special offers
- Your events
I've written many, many times in this blog about understanding what you do better than others. And this is what you need to concentrate on. I'll give you a few examples-
Waitrose have high prices but their customers love their absolute quality and great customer service.
Boots are very pricey but focus on their loyalty card and customers return.
Aldi mixes price with availability and customers have loved this balance.
So what is your USP? What can you do better than your competition? What are you capable of that nobody else in your town is? These are the things that will drive you forward.
Communicate this with your team, communicate it with your customers and look away from just dropping your price to compete - there are other, better ways to differentiate yourself.