How Inflation Is Impacting eCommerce Brands and Sellers
In a world of rising inflation, the ongoing war in Ukraine, and the remnants of the COVID-19 pandemic, many facets of the global world are impacting eCommerce. Among them, the most prominent are inflation and a disturbed supply chain infrastructure.
Today, we are seeing the highest inflation rise since the 1980s, which is undoubtedly causing consumer and retailer concerns as prices are skyrocketing. This article examines how inflation impacts consumer buying habits and eCommerce brands selling on Amazon and Walmart and offers solutions for coping with such effects.
What Is eCommerce Inflation?
First and foremost, eCommerce inflation results from a significant imbalance between supply and demand. The outcome? Suppliers on Amazon and Walmart are increasingly struggling to meet consumers’ increased demand due to a general rise in the price and production of goods.
According to a recent study that examines online inflation data, Adobe attributes part of increased eCommerce sales to inflation, which is said to have begun during the early months of the pandemic and has continued for 21 successive months.
It all started with COVID when isolation and social distancing protocols were enforced, and shoppers flocked to online marketplaces to shop from the safety of their homes. Such restrictions made it difficult for factories and warehouses to operate at maximum capacity. As a result, heightened online shopping caused demand to soar, putting considerable tension on supply.
The Impact of eCommerce Inflation on Consumers
eCommerce inflation is impacting the way consumers shop online in three main ways: they are cutting back on nonessential products, buying larger quantities, and reverting to in-store shopping. Given that energy prices are one of the main drivers of overall inflation, most consumers will reduce online spending on nonessential products and redirect their budgets to essential household and familial goods such as food and electronics.
In addition to stable income, stock issues, which also impact eCommerce sellers, are affecting consumers and their online purchasing behavior. The same Adobe study mentioned earlier also found that 60 billion “out-of-stock” messages were displayed to customers online between March 2020 and February 2022. Inevitably, the growing rate of out-of-stock products is causing consumers to worry about how and when they will receive their products.
According to Retail Dive, a company that provides eCommerce news and analysis for retail executives, it was found that in January and February of 2022 alone, higher prices drove roughly $3.8 billion in online sales growth with no indication of a lack of consumer demand and that online shoppers are predicted to spend as much as $27 billion more in 2022 on the same purchases.
Despite the expected increase in eCommerce sales, a study from Forrester, a market research company, anticipates that brick-and-mortar storefronts will dominate in sales over the next few years compared to online sales. Notwithstanding the ebbs and flow of consumer shopping behavior, things are expected to return to normalcy when inflation rates go back down.
What Sellers Can Do to Cope With eCommerce Inflation?
There are five things Amazon and Walmart sellers can do to cope with eCommerce inflation to ensure that their businesses stay above water as they ride out the inflation wave. To mitigate the effects inflation has on eCommerce businesses, sellers can focus on brand building, raise prices, monitor sales data, maintain a healthy stock, and adopt Buy Box best practices.
1. Brand Building
In times of variability, it is key for Amazon and Walmart brands to focus on brand building and long-term success, not on short-term adversity. To continue to drive customers to your products, brands should establish an identity and a loyal community.
Doing so can enhance credibility and customer loyalty. To better build your brand, you can leverage product inserts, market your products cross-channel by crafting a multi-channel retailing strategy, and utilize your eCommerce buyer persona materials.
2. Raise Prices
There is always a chance that raising prices can drive down demand, but this is not the case when inflation rates are as high as they are today. The good thing is that you will not be the only one raising your product’s price; competitors will also do so. Raising prices can reduce the cost you have to incur as a seller and ultimately work to increase your profit margins and prevent inventory depletion.
Additionally, there are eCommerce tools that allow Amazon and Walmart sellers to set up customizable product alerts notifying them when the price of any product they track changes so that they can alter their price accordingly to remain competitive.
3. Monitor Sales Data
Perhaps the most effective way to combat inflation on Amazon and Walmart is to regularly monitor sales data such as orders, profit and loss, and units sold. This can be done using designated Amazon and Walmart analytics platforms that allow sellers to measure the financial health of their products and subsequently identify areas and products that need improving. Insights gleaned from such metrics can indicate ideal opportunities for product price increases.
4. Maintain Stock
With a scarcity of manufacturers, maintaining a healthy inventory stock is more important now than ever as it will set you apart from competitors who cannot fulfill orders. If the price is right, it may be worth placing bulk purchases with suppliers. Customers will flock to your brand and boost your pricing power if your product is one of the only ones in stock.
Leveraging a healthy inventory can considerably help you hedge inflation since most sellers will be frugal and maintain minimum inventory, increasing their odds of going out of stock and increasing your odds of fulfilling their clients’ needs.
A good strategy would be to set up out-of-stock alerts on your competitors’ products so that you can get notifications when their stock drops or when the status of their products goes out of stock. Such alerts would signal an opportune moment to raise your product’s price.
5. Adopt Buy Box Best Practices
Luckily, the four strategies explained above (brand building, raising prices, monitoring sales data, and maintaining stock) all constitute as best practices for winning both the Amazon and Walmart Buy Box. In addition to these four techniques to combat inflation, brands and sellers can also optimize their products’ listing information to display optimal content.
Listing optimization allows brands to adapt their PDPs to ensure their products meet shoppers’ needs, rank higher in the search results, reduce the number of product returns, and work to enhance overall conversion rates. Two elements, in particular, dictate the success of your listing optimization endeavors: high-quality images/videos and keyword research.
During uncertain times, when geopolitics, warfare, and pandemics persistently affect inflation and pricing, it is vital for Amazon and Walmart brands to strive to satisfy their customers’ shopping needs and diligently monitor and analyze their competitors’ performance.
Using competitor analysis tools is crucial to understanding more about the current market and client behavior. Such tools can more accurately help brands answer indispensable business development questions so that they can adapt their marketplace strategies accordingly and come out of eCommerce inflation stronger.
A recent Business Insider article anticipates that inflation will improve in 2023, although gradually, and that the first indicator of a more steady supply chain will be shipping prices. So, keep an eye out for that and be sure to implement the five strategies listed above to ensure marketplace success.