Bamboo Rose Blog | Retail News

How Can Retailers Maintain Margins Amid Sky-High Inflation?

Retailers and consumers are grappling with a disconcerting level of inflation with the holiday season right around the corner, sending costs soaring at every stage of the product lifecycle.

The increase in consumer prices, once called “transitory” by Federal Reserve Chair Jerome Powell, has proven to last a lot longer than optimistic White House officials initially predicted.

Prices have risen by 6.2% in the US according to CNN, which marks the biggest jump since November 1990. There are myriad reasons for the inflation surge: partly the pandemic, which caused a historic economic shut-down as factories, restaurants, and airlines around the world closed and millions lost their jobs.
The other major contributor comes by way of persistent supply chain bottlenecks. Labor shortages, ongoing factory closures, and shipping delays that began as global shutdowns lifted have only gotten worse in recent months.

The widening rift between supply and demand prompted by the current supply chain disaster has further stoked inflation, putting consumers in a bleak spot as they scour stores and ecommerce sites for holiday gifts.

Legislators are now focused on reducing supply chain bottlenecks to cut down on the delays that have left store shelves empty amidst high demand. President Biden recently imposed a $100 fine at the nation’s busiest port complex, which includes twin ports in Los Angeles and Long Beach, in an effort to reduce the pileup of cargo ships.

Companies that leave shipping containers on the docks will face a fine of $100 and increasing increments ofl $100 fines for every additional day a container remains stuck at port.

Economists also expect policymakers to tighten monetary policy by increasing interest rates and reducing emergency stimulus.

The question for retailers during this turbulent time is this: how are they are going to maintain profit margins when the price of everything — from raw materials to freight — is through the roof?

While many retailers are significantly raising their prices to account for increased raw materials, manufacturing, and shipping costs, others with the data and insights to make smarter design and transport decisions at key points in the product lifecycle will have a unique opportunity to undercut the competition.

Negotiating costs with suppliers and streamlining expenses in collaboration with freight forwarding partners during periods of instability and disruption is critical to staying profitable and competitive.

Implementing a business network approach  capable of delivering intelligent insights to inform decision-making for sourcing and global trade operations positions retailers to achieve these objectives.

The Bamboo Rose Multi Enterprise Platform is designed to empower retailers to identify and engage with the best possible supplier partners while assessing the financial implications of all product decisions, enabling retailers to bring the most profitable products to market.

Bamboo Rose’s Should Cost Analysis capability helps retail buyers identify the best possible supplier offers by using historic purchasing information and current material and component costs to calculate the expected cost of a product and graphically comparing this number with all available supplier offers.

This analysis helps buyers negotiate better margins while ensuring quality levels meet consumer expectations.

With these insights in hand, retail product and sourcing teams can quickly simulate and understand the financial impact of buying decisions across geographies.
The Supplier Recommendation feature also helps retailers make better financial decisions during the sourcing process. The capability identifies and recommends the suppliers best equipped to support product requirements against a range of configurable business criteria, including transportation costs, to deliver a recommendation for the optimal vendor partner.

Bamboo Rose can also analyze sourcing and design data with the financial dynamics of global trade to give retailers a complete estimated landed cost (ELC) of products. This visibility allows retailers to boost profit margins and establish payment terms, delivery terms, and containerization with supply chain partners.

Similarly, the Purchase Order management module allows supply chain professionals to holistically assess the actual landed cost of goods from data sources including commercial and service invoices. This estimate includes real-time costing insights based on international trade factors such as duties, taxes, and tariffs.

Combined, these insights enable retailers to cut costs throughout each phase of the product development and supply chain process to lower costs for themselves and consumers.

At a time when almost all goods are disproportionately expensive, keeping costs competitive can help retailers expand their consumer base and gain market share throughout the holiday season.