Top 3 Strategies for Dealing with Inflation for Retailers in Asia

Recent events in our world history have driven inflation to surge across the globe. The impact is being felt across industries and in households everywhere.

In Asia, retailers have been grappling with the challenges brought on by inflation - the increased cost of operations, supply chain shortages, the pressure on profit margins, increased competition, difficulty in forecasting and to top things off, big changes in customer buying behaviour.

These factors, coupled with the acceleration of technologies like AI and ML present a huge opportunity for retailers to capitalise and make improvements in efficiency, agility and overall resilience of the business.

Now is a crucial time to make fundamental changes to outdated ideals in order to survive the climate of today’s retail landscape in Asia. In this blog, we explore the three most important business imperatives required for long-term survival, success and competitive advantage.

Chapter One: Rising Acquisition Costs

Rising acquisition costs have proven to be a significant challenge for retailers in Asia, impacting profitability and long-term sustainability. But, it’s not all bad news. The additional pressure fuelled by inflation is thrusting retailers into action with the realization that if they adopt new marketing strategies and improve customer retention, they can mitigate the impacts of rising acquisition costs and remain competitive in the market.

“If we try to acquire new users all the time, we need more budget for the offerings, so we try to focus more on retention programs,” says Anupong Tasaduak (Tao), the Chief Commercial Officer for NocNoc. As seeking new customers gets more expensive, retailers take better care of the customers they already have. Enhanced loyalty ecosystems that enable consumers to earn points at one organisation and use them at another are becoming an increasingly popular way to retain customers and attract new ones.

Retailers have also realised that by improving the customer journey, offering enhanced experiences and tracking interactions with touchpoints and understanding which factors influence their buying behaviour - they can use this data to drive every decision and re-imagine the business from the perspective of the customer.
Zero-party data gives insights into customers' behaviour throughout the entire customer journey meaning every aspect of their interaction can be altered to give an enhanced experience. Through this, retailers are going a step further and offering hyper-personalised experiences based on customer preferences using the latest tools available to them.

Take Lululemon’s rewards program, for example, which offers additional savings, early access to products, and virtual events through one simple membership. Lulelemon use surveys to gain valuable information, as well as AL and ML to scale these insights into actionable changes throughout the business. Keeping relevant and engaging to customers in turn reduces the cost of acquisition.

Chapter Two: The Rise in Dynamic Pricing

The adoption of dynamic pricing is the second business imperative of retailers today as many brands turn to dynamic pricing to remain competitive, optimise their revenue, and rapidly respond to changes in real-time under the weight of inflationary pressure.

Why so? Because dynamic pricing gives brands the ability to increase revenue by matching prices according to demand. Retailers can respond rapidly to changes brought on by inflation by increasing prices at times of opportunity (holidays, sales etc) and conversely, during slower periods, they can lower prices to increase demand and boost sales. It also helps facilitate a quick return on investment, particularly useful for start-ups trying to compete with established retail giants.

Here are some other great benefits of dynamic pricing:

• The ability to optimise inventory management by aligning prices with stock levels. By adjusting prices based on inventory levels, retailers can prevent overstocking and reduce the risk of unsold inventory.

• Deeper data insights since brands must adjust data in real-time while considering supply and demand, large volumes of data are crunched in seconds keeping ahead of the competition.

• A better understanding of customer behaviour means retailers can optimise the customer journey.

Take Amazon, which offers pricing that changes on a daily basis for key products. This model incentivises shoppers to purchase when they see a “good deal”. Amazon’s process follow items that maintain popularity, related items, and items with a sudden increase in traffic. In doing so, they lead the market in pricing and continuously move products.

It’s also worth noting that popular pricing strategies based on discounts boost sales. However, as effective as it seems, it can be a double-edged sword as shown in the Retail Pricing Strategy case study by eCom Nation x Golf Gods. which highlights how retailers can continue to grow in key markets and weather the effects of heavy discounting via dynamic pricing by analysing sales velocity and sell-through rate. The result? Golf Gods were able to move old inventory, clear up warehouse space, and increase net profit by over 50%.

Chapter Three: Evolved Omnichannel

Mandy Arbilo, the Associate Director of Razer (the world’s leading lifestyle brand for gamers), says, “omnichannel is a consistent theme, but how is this going to evolve as a framework?”