The Cost-Of-Living Crisis Will Put More Pressure On Shoppers
The consumer price index in the United States climbed 7.9% from last year in February, the highest rate in over four decades. The last time such a steep ascent occurred in the United States was in the 1980s.
Rising petroleum, electricity, food, and housing costs are producing a global cost-of-living problem, not just in the United States. In the United Kingdom, prices increased by 5.4% last year and have continued to rise in recent months.
The British Retail Consortium’s chief executive, Helen Dickinson, noted that furniture and flooring, in particular, witnessed particularly strong demand, resulting in price increases as rising oil prices made transportation more expensive.
On the other hand, fresh food inflation has slowed marginally from 3% in December to 2.9% in January, although it remains higher than the 12-month and six-month increase rates.
Fuel costs in Australia increased by one-third in 2021 and are expected to rise even more in 2022.
A Historical Event
It is an entirely new and undesirable experience for at least one generation of customers. Further, it’s occurring in a tech-driven environment unrecognizable from the 1980s, especially for retailers and companies.
This presents a unique set of difficulties. That is what drove David Roth, Chairman of research firm BAV, to write a whitepaper titled “The New Deal: Re-evaluating Value in Extraordinary Times,” issued this week.
Since a massive chunk of purchases now depends on internet shopping or e-commerce, this poses a mammoth challenge across industries.
Perception of Value Today Vs. the 80s
“Consumers are rethinking value,” Roth tells Forbes, “and brands and retailers must now redefine the value they offer.”
The equation for value was easier forty years ago. “Value used to be almost exclusively about price; we might say V = P,” Roth stated. “In 2022, it’s much more complex, perhaps V = P x Time x Quality x Convenience x Purpose and Values.”
That is why businesses will not be able to wiggle out of the current crisis with discounts, as they might have done more successfully decades ago. Pricing is of the essence. However, it is only one of several factors that impact the decision of whether or not a customer clicks the purchase button.
A massive difficulty will be harnessing value, an outdated undertaking for both brands and merchants. “Over the past decade, value has often played second or even third fiddle to other issues, and it must again be put in the spotlight,” says Roth.
Re-Writing Tactics Appropriate for the Ages
Roth suggests starting again by re-imagining the playbook by using new tactics to understand more contemporary aspects of the current inflation. Admittedly, as stated in the whitepaper, this happens to be the first account of inflationary growth in the history of e-commerce.
Opportunities emerge from crises. Jim Sinegal created the Costco brand in 1982 and debuted it the following year in Seattle. Today’s inflationary crisis, too, may give birth to techniques, procedures, and tactics that revolutionize economics.