The True Cost of Inflation: Effects on Businesses and Consumers

It’s been a challenging few years for all. From concerns over our health to the weariness of social distancing to the current economic uncertainty,  no one’s been left untouched. And you’ve likely heard ad nauseam about rising inflation—and may be personally experiencing it. After all, it’s now hit 9.1%, a four-decade high.

But what exactly is inflation? What’s triggering it at this point? And more specifically, how does inflation affect businesses and the consumers they rely on?

Read on to learn more about inflation, its causes, its implications, and what you as a business leader can do to make the best of this tough situation while finding a financial upside even while budgets are tight.

What is Inflation?

Inflation refers to an across-the-board increase in the prices of goods and services within an economy. This change means that each unit of currency has less buying power than it previously did.

At face value this might sound like a problem to avoid at all costs, but it’s more complicated than that.

The Cost of Inflation—and the Benefit

Under the right conditions, it’s actually not bad. A small amount of inflation—about 2% per year—is actually good for an economy. Steadily increasing prices incentivize consumers to purchase goods and services now, as they believe prices will rise in the future. This means higher demand for goods and services, and in turn more jobs and value created in the economy. This creates a healthy cycle.

This cycle also staves off deflation, the highly detrimental decrease in prices. When prices fall, consumers have little incentive to buy, as they hope the goods will be cheaper in the future. This lowers overall demand, decreases the need for workers, and the job market and overall productivity of an economy stagnates. In this way, we want and need controlled inflation, even if it seems counterintuitive.

On the other hand, the cost of inflation on our economy gets incredibly steep when it increases too rapidly. When prices increase 3% or more per year, consumers begin rushing to purchase large amounts of goods in hopes of avoiding much higher prices in the near future. When this happens, manufacturers have a hard time keeping up with demand for products. It’s also harder for them to keep wages high enough to maintain workers. In severe cases, even basic staples become too expensive for the average buyer.

What’s Gone Up in Price?

Business leader or not, you’ve likely noticed how everything these days is more expensive. This uptick in price is the cost of inflation.

Have you tried to buy a car recently?  Perhaps you’ve wanted to furnish your place with new housewares. Or take a flight to a favorite vacation destination. Maybe you’ve simply noticed your grocery bills creeping up.

Inflation across all of these areas and numerous other categories is increasing at faster-than-ideal rates. This leaves the average consumer footing more of the bill through price increases while personal incomes that haven’t kept up. And that’s if they’ve even managed to hold onto their jobs through rising demand and prices.

Consumers have definitely noticed, but unfortunately, there’s little the individual can do but adjust their budgets, seek deals, and live a bit more frugally.

What Started This Inflation…

We’ve covered what inflation is and the kinds of goods it affects, but you still may be wondering what’s driving this inflation.

Industries such as travel, hospitality and food service were the first to be turned upside down. Those working in these areas suddenly found themselves working fewer hours or even jobless. Meanwhile, demand fell and businesses cut back or temporarily shuttered their doors.

Even goods and services that were still in demand had to comply with new pandemic regulations. Manufacturers behind key technologies, such as microchips, were forced to close their doors or reduce staff causing production decreases and constraints throughout the supply chain. Prices for the small amount of goods that they were able to produce jumped sharply.

Once governments offered stimulus money to help, production capacity was already lagging and unable to provide for even those with money to spend. When demand returned so quickly, rising prices lead to hoarding and vice versa, creating a harmful feedback loop.

…And What’s Keeping Cost of Inflation Going Up

Now, economic experts debate exactly why this wave of inflation is so persistent. But most agree that, at this point in time, there are now multiple additional factors at play:

• Businesses pass on rising costs to consumers, like higher fuel prices
• Aggressive conflicts around the globe have slowed the production and delivery of goods
• As people rethink their career choices post-pandemic, resignations and early retirements have made it difficult to hire workers and fill an ever-widening pool of open positions
• Government aid packages are funneling money to consumers in-need, driving demand up while supply still struggles to adjust

As long as the supply chain struggles to create and move new products quickly, brands can’t effectively provide for even those with money to spend. Ever-rising prices lead to hoarding behaviors and vice versa, creating a harmful feedback loop.

How Does Inflation Affect Businesses and Buying Habits?

As we mentioned, there’s really very little that the average consumer can do to improve global macroeconomic trends. They can (and will), however, adjust their spending behavior in response to unemployment, price hikes, and other pandemic-time changes.

High percentages of surveyed consumers said that they would:

• Switch to lower priced brands
• Seek out additional discounts and promotions
• Cut back on discretionary and non-essential spending
• Purchase more store brand products
• Switch to lower priced retailers
• Purchase items in bulk
• Purchase fewer premium products

If any of these behaviors eat into your business model, you’ve likely been feeling the pain of inflation.

What better place for consumers to seek out bargains than at a discount retailer, especially a place identifying as a dollar store.

In fact, American dollar stores chains are posting record numbers. For further proof of the demand for bargains, look at the types of new stores that opened across the country in 2021. As many as 4-in-10 were dollar stores. You may have even heard that Dollar Tree and Family Dollar plan to open 590 stores in 2022 and begin providing higher priced goods.

And it’s not just dollar stores that have been experiencing a boost in sales lately. All manner of resale retailers have found success in this economic climate. While brick and mortar discount stores have long acquired unsold merchandise cheaply and passed it on to customers, eCommerce platforms  make this trend possible online. Especially in the apparel space, sites and stores ranging from bargain-bin to second-hand luxury goods offer customers superior condition brand name products for cheap. All-in-all, the resale and secondhand market for this industry is expected to reach $82 billion by 2026.

You may have even lost some revenue to stores that have become players in the secondary market. Not to worry, though—there is still demand for your products, so you won’t be left high and dry with your unsold wares.

Resale Retailers Count on Your Inventory

Taking cues from their demanding customers, businesses that resell unsold, returned, secondhand and scratch-and-dent inventory are hungrier than ever for more merchandise, especially now that it’s difficult for consumers to get their hands on brand new inventory. How can you reach these excited entrepreneurs? Online B2B auctions are the way to go.

While there are many benefits to online auctions, demand and recovery rates may be even higher in times like these where inflation rises at higher-than-healthy rates and the future is still uncertain. It’s worth evaluating (or reevaluating) a powerful online auction solution to see if your unsold goods might be better off in the hands of one such resale retailer—all while clearing out old stock and recovering cash value for your organization.

For recovery and demand, B-Stock is your best bet.

Recover Cash for Your Excess Inventory Quicker through B-Stock

Whether you’re an enterprise organization or small retailer, your primary focus is to introduce and move the newest products to your customers, not spending thousands—or perhaps millions—handling returns, damaged inventory, shelf pulls, or last season’s fashion. All the steps involved with processing and managing this merchandise involve warehouse space, employee time, overhead costs, not to mention all the cash tied up in rapidly aging stock.

If you want to move inventory out quickly, while recovering as much as you can, you need to reach buyers who really want your stuff. Only B-Stock gives you direct access to a network of over 500,000 buyers through customized marketplaces. This provides you with more control and better recovery rates than traditional liquidators can deliver.

With the help of our account and listings teams, the process is faster than you may think. In just days, you can be selling your inventory to carefully vetted buyers whom you’ve approved. Seller agreements ensure your goods are sold in a way that protects your brand and doesn’t interfere with your primary sales channels. You may recover an additional 30% or better than what traditional methods offer in certain categories and have cash-in-hand in fewer than 15 days.

So, how does inflation affect businesses? As you’ve read, it impacts you in nearly every way. And we don’t yet know the full extent. But one thing is clear; while this period in time tests our resolve, there are certainly upsides to keep your business in the black. The benefits that B-Stock offers, while a viable proposition even during prosperous times, is even more important during periods of inflation where changing buying habits of the savvy, cost-conscious consumer helps you to maximize your bottom line.

Contact us today to learn more.