The inflationary environment
Inflation is surging and there is a risk of recession and 10% inflation with fuel bills increased by 54% in April 2022 and are expected to further increase by 40% in October 2022. More than a fifth of Britons struggling as grocery price inflation hits a 13-year high.
Consumers are really feeling the squeeze at the supermarket tills, fuel pumps, and gas hobs. In the short term, this inflationary environment doesn’t look like it will go away with Deloitte projecting that the current global surge in inflation will be temporary and will likely abate by the end of 2023.
What does this mean for eCommerce businesses?
Online retailers brands, retailers and marketplaces are already facing challenges around the supply chain and will continue to be a challenge as China remains in lockdown, which has led to price rises due to shortages of chipsets, longer delivery times and shortage of products that are in demand. The opening of the economy also means consumers’ spending habits as now they are able to choose shopping at physical stores instead of shopping online.
The inflationary environment is another major effect on consumer spending habits with 32% of consumers planning to cut back on their household spending this year. The areas of spending cuts by most common answer are ranked below:
- Eating out – 55%
- Clothing – 50%
- Takeaways – 49%
- Weekly food and drink shopping – 45%
- Holiday(s) – 33%
- Technology, such as a mobile phone – 26%
- Household electronics (such as a TV) – 22%
- Household appliances (such as a fridge) – 20%
- Property (purchase, or extension/renovation) – 19%
- Car or motorbike – 17%
- Other purchases – 6%
What have eCommerce businesses been doing to survive in the inflationary environment?
Online businesses have put a lot of plans and strategies into action already such as raising prices and reducing inventory to maintain healthy cash flow and reduce supply chain costs. However, despite this, it is quite clear that the inflationary environment has put online businesses in survival mode as:
- You can only keep rising prices for so long and consumers can only take so many price increases. We’ve already seen prices continue to increase month on month with online prices increasing in 13 of the 18 categories in January 2022 and up 2.7% compared with January 2021.
- Are you really reducing the inventory of the right products and maintaining a good stock of products in demand? Upp’s audit data of retailers shows that 88% of products advertised received minimal visibility and the top 15% of SKUs received negligible visibility. This means supply chain planning isn’t as effective as it could be as sales channels, in particular Google Shopping, isn’t maximising inventory exposure and visibility
- Maintaining healthy cash flow is something all businesses want regardless of the environment however Upp audit data reveals that up to 40% of Google Shopping ad spend generated zero revenue, this hampers online businesses’ efforts to maintain a healthy cash flow and maximise ROAS potential therefore negatively impacts on profitability
- All the above have a negative impact on the effort you are putting in to reduce supply chain costs in particular procurement and storage of products. If your entire inventory doesn’t get visibility on Google Shopping, it reduces the accuracy of your demand projections and your capabilities to procure and store the right products. This leads to capacity and storage space being taken away from products that do sell well or could be selling well if given the right visibility and ad spend allocated to it
How does Upp help online businesses navigate the inflationary environment?
Upp doesn’t believe in providing the best-case scenario based on best practice, gut feeling and guidance on what’s typically expected. Its approach is always data-led and using our data-led audit will reveal exactly where the opportunities are, what potential there is and how Upp does the rest to maximise your revenue potential in the inflationary environment.
Through market-leading AI and Machine Learning technology and working with Google’s Performance Max – not against it, Upp will:
- Automate your Google Shopping performance with auto-creation and optimisation of campaigns across your entire inventory. It’s AL and Machine Learning algorithms learn from your business and product performance data and decide the best product and campaign structure for your business strategy
- Give you back control and transparency with insights that inform decision making and other areas of your business. It does this by running your account by the item ID, and splitting by marketing and inventory metric performance, which allows Upp to control spending against all SKUs and provide transparency on exactly how much each SKU is receiving in Ad Spend vs Actual Revenue generated.
Upp customers achieve on average:
- 62% increase in the rate of transactions
- 48% increase in available budget spent
- 27% increase in growth of revenues
- 16% increase in new customer purchases
- 14% increase in conversion value for brands
Whilst Upp’s platform has achieved amazing results for our customers with customers like Charles Tyrwhitt, which have seen a 14x return on investment and scaling the success for Nordgreen to 10 regions, it can not change the inflationary environment. It has no control over consumer spending habits and the cost of fuel nor can it change or influence what the macro-environment is.
Upp works to navigate your business through tough times and ensure you come out of these tough times with an optimised Google Shopping sales channel that is able to reach revenue potential for the environment your business operates in thus positively contributing to healthier cash flow and improved inventory management.
If you want to know how Upp will help you within the inflationary environment and supercharge your Google Shopping, request a free data-led audit with us today.