How Retailers Can Fight Rising Inflation

The need for retailers to reach value-conscious consumers with promotional content is more challenging than ever, due to changing media consumption habits and rising printing costs. This presents an opportunity for retailers to leverage digital channels to scale the distribution of this content, using their own first-party data to deliver personalized offers and messaging. Retailers who embrace this shift move the needle on price perception, increase brand popularity, and drive additional traffic, sales, and ROI.

Low voicea Perion company, creates memorable advertising experiences by thoughtfully orchestrating solutions across video, advanced television, rich media and social media to drive brand impact and audience engagement across virtually all screens and all devices.

Daniel Aks is the President of Undertone, leveraging his extensive operational experience in C-level roles for the information, education and consumer media industries. I recently spoke with Dan about how retailers can combat rising inflation.

Gary Drenik: How have supply chain issues, labor shortages, inflation costs and increased competition affected retailers?

Dan Aks: Ongoing supply chain shocks favor e-commerce capabilities, so retailers with larger digital channels than physical ones will relatively thrive. Beyond storage levels, service levels are dropping due to labor shortages. The workforce that typically serves customers in stores or works in distribution centers is becoming increasingly scarce. For brick-and-mortar retailers who rely on stocked shelves from fulfillment centers, or keeping shelves in-store, or courteous service, will experience operational difficulties

The long-term solution is clearly investment in automation. Self-service checkouts are already on the rise and distribution centers are becoming more and more automated. Young people are avoiding these jobs, so any idea that this trend can be resolved is not rooted in reality without unaffordable pay adjustments.

All of these have had a significant impact on retailers, in several areas, including:

  • Product shortages, resulting in lost revenue and profits, in addition to unhappy and frustrated customers. Indeed, according to a recent Thrive Insights & Analytics survey, 47.6% of Americans believe product shortages will continue for 6-12 months.
  • Poor levels of service in dealing with customers and addressing their frustrations, often due to labor shortages.
  • Increased costs throughout the supply chain, which has resulted in higher prices for consumers, in some cases significantly. This has led consumers to change their shopping habits and, in many cases, their shopping cart as well. This has led to price-conscious shopping behavior and in some cases has presented growth opportunities for retailers in the form of private labels, which are often more profitable. As supply chain issues continue to impact retailers and consumers with no clear vision, according to a recent Thrive Insights Analytics survey, 40.5% of Americans are pessimistic about the US government addressing the issue, meaning it’s more important than ever for retailers to adapt solutions to increase revenue.
  • With more constrained consumer budgets, competition for consumers’ wallets has increased, with cross-buying becoming more prevalent, as well as the conquest of promotional tactics by competing retailers.

Drenik: How have data privacy issues impacted retailers and their ability to target consumers?

Aks: Consumers are more concerned about their privacy, which further limits retailers in their ability to use third-party data. On the other hand, the emergence of first-party retailer data has ushered in material opportunities to leverage their first-party shopper data, in the form of Retail Media initiatives.

While retail providers have been hungry for access to this data, retailers will need to continue to evolve their offerings. Introducing dynamic, data-driven messaging practices in high-impact channels, including personalized TV, will allow retailers to go beyond consumer CPG marketing dollars and help capture spend of the national brand. This, coupled with the new era of privacy-focused strategies such as Undertone’s SORT™ technology, will help reach wider audience groups and deliver better performance.

Drenik: How have advertisers adapted to the changing landscape?

Aks: Advertisers work closely with retailers to maximize the use of first party data. Not only to craft personalized offers for consumers, but to better understand price elasticities and relative competitive strength on a market-by-market, or even store-by-store basis.

Additionally, advertisers work with Undertone to determine real-time inventory levels, managing supply chain issues by only offering what is in stock at each store. This strict inventory management approach not only avoids unnecessary out-of-stock ad spend, but also provides the consumer with a better experience in finding what they want when they arrive at a store.

Advertisers needed to improve the efficiency of their ad spend, with positive ROAS being a critical metric for them. Importantly, the era of personalization and relevance has arrived, with advertisers striving to deliver more relevant and personalized ads and offers to consumers.

Drenik: What advertising solutions are available?

Aks: Emerging hyper-personalized solutions, such as those from Undertone. These solutions combine first party data, environmental data, selected prices, items, stock levels and many other signals to create massive permutations of offers. It is also a huge help in liquidating excess inventory. The goal is to drive demand through AI-powered product and price selection, and eliminate waste through unnecessary exposure due to consumer disinterest or stock-outs.

Personalized, dynamic, cross-channel and data-driven advertising solutions are available to meet this demand for personalization in the market. There aren’t many capable of running across multiple channels, but those that can are seeing fantastic adoption by the advertising community.

Drenik: How will retailers continue to fare in 2022?

Aks: Retailers stumbled a bit in the second quarter as they stocked up to avoid supply chain issues. Retailers are masters of inventory planning. Walmart practically perfected it. But even they couldn’t predict war, inflation, rising interest rates and layoffs. The good news is that they have largely found their feet. They’ve taken the pain of inventory liquidation and they’ve largely cleaned up their excess inventory.

Consumers are returning to stores, which favors omnichannel retailers over strictly e-commerce ones. We are seeing increased interest from DTC brands for physical stores.

It is clear that macroeconomic trends will continue to play a crucial role. Inflation needs to subside and the recent wave of layoffs needs to flatten out.

The rest of 2022 will continue to be challenging in general, with more acute winners and losers emerging. The ability to stay on point with messaging and offers, while running campaigns that align with retailers’ inventory mix, will ensure that consumer satisfaction is maximized as much as possible, while driving strong profits for these retailers.

Drenik: Thanks for your time and ideas, Dan. Certainly an important question as the FTC seeks to establish a federal consumer privacy law.