When prices rise what do you do to address the issues with your customers?
Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing.
In reports released late last year from sources such as http://seafood.com the average per capita consumption of seafood was down in 2013 across the board. The effects of trends like this from a health standpoint are critical as seafood represents a big portion of the healthy food our diets require. How retailers are dealing with this trend, is also important. With buying patterns changing, price continues to be the #1 reason experts attribute this shift in consumption which leads to the source of discussion for today’s blog: How do you deal with increases in price due to market changes out of your control?
Reduce quality – Reducing quality is one option businesses choose to deal with increasing costs involved with delivering their products. These changes are not ones that manufacturers and retailers tout to their customers but they are ones that happen to combat rising prices by many businesses. For an industries whose #1 priority is safety and sustainability, this is usually not an option, but regardless there will be some who choose this path before the product gets to you, making the research and monitoring of where your products are coming from even more important.
Reduce quantity – In a recent article recapping the Global Aquaculture Alliance 2013 meetings in Urner Barry’s Reporter, one representative from BJ’s Wholesale Club stated that their $9.99 price point for a bag of shrimp could not be changed or the consumers would balk and not continue to buy so they were adjusting the weight of the $9.99 in order to keep the price intact. This type of move whether by a retailer or by a restaurant that reduces the offerings they serve, is a short term one that has an obvious endpoint in the limitation of the size before consumers must accept either a reduction of quality of increase in price to keep the quality they expect.
Change the mix – Changing the mix of products being offered is another viable method to address the issue of rising prices. In the seafood industry, for example, consumers and retailers alike are shifting their buying patterns away from the higher priced shellfish towards seafood categories like whitefish which have more attractive pricing and have received much attention for their positive health benefits. Changing the mix of the products you carry and offer your customers can offset the rising costs of other categories and allow for the possibility of new products and new supplier relationships.
Change the supplier – When the market is dictating rises due to weather, other markets indexes, or transportation costs it can be difficult to find suppliers who are able to offer relief. Changing a product mix and seeking out suppliers who are growing and looking to acquire new business can lead to additional sourcing options and provide some protection against the price increases. In these cases, however, there are always risks involved so it is important to do the due diligence and research on a new supplier’s history and reputation before making a change based on price alone. Value and low cost is only as important as the quality you are able to maintain for your customers.
Rising prices are part of the world we live in and are something that retailers and manufacturers will always have to deal with. How you deal with those increases and what you are (or aren’t) willing to sacrifice to deal with those changes will be the basis keeping or losing your customer base. For more information on how SafeSourcing can assist your team with projects meant to take on increasing prices or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.