Dynamic and driven entrepreneur, Gemma Crowe established Infamous Swim, an apparel and beachwear business in September 2018. It all went swimmingly for two years, with very healthy profits. Then along came COVID, and the Australian market flatlined as Gemma’s customers were forced to stay home.
Many other retailers were discounting to get stock moving, but Gemma wasn’t prepared to sacrifice margin. She decided instead on a bold alternative – to pivot from the domestic market and diversify into the US, where retail sales were less impacted.
Gemma explored the unsecured loans options available from non-big-bank lenders, and acquired funding, which Infamous Swim invested in digital marketing, tracking customer insights and product development to build profile in their new US market.
“It was a huge risk, but we smashed it in the US that first year,” says Gemma.“Then in2021 it got even better, revenue was 350% up on previous year.”
Gemma doesn’t pretend there weren’t a few bumps in the road to this success. But she found that her instinct, and the funding to support the venture into a new market helped take Infamous Swim to the next level.
Like Gemma, many retail SMEs stared down COVID, only to now face the challenge of inflation. When Banjo surveyed SMEs in February and March this year for its SME Compass Report, 70% of businesses in the retail industry were concerned about inflation. This compares to 55% of SMEs across the broader spectrum.
The level of concern by SMEs in retail may be because they also felt the least able to increase prices. As a result, they were the most likely sector to opt for cutting costs.
Despite it being a tight market, there are a few strategies retailers can use to mitigate against the current inflationary environment.
Digitise your business
Introducing more digital processes to your business can improve efficiency and reduce costs. identify all the business processes that you and your staff spend a lot of time on, then look at where you could digitise these. There are plenty of apps that can help you automate or digitise repetitive tasks, whether it’s basic bookkeeping, customer service or marketing. Even just a saving of 3-5 hours per week can help you hedge against inflation.
When selecting which processes to automate, think about whether the task has relatively few variables, and doesn’t need much decision-making. Invoices, marketing emails, contract renewals, and purchase orders are just some examples.
You can also use digital processes and strategies to reach new, lucrative markets or more sharply target existing ones.
Infamous Swim plans to drive revenue in 2022-23 using digital strategies like focusing on SEO (search engine optimisation) and leveraging analytics to strengthen customer engagement and product development.
Guard against ‘sticker shock’
You probably have a good idea of what level of pricing your market will bear. While it’s important for a business to maintain its margins, pricing yourself out of the market carries huge risk. Keep a close eye on your competitors and your industry more generally, to monitor pricing and other developments that it can impact.
In an inflationary environment, it’s critical to manage your customers’ expectations with carefully crafted, clear communications. Avoid sounding defensive, and to help soften the message, look at other ways you can add value to your customers at low or no cost, such as enhancing your service offering. People usually tolerate paying more if they feel they’re getting good service.
Consolidate your supply chain
Supply chain disruptions have been a COVID feature, and they’re still with us. Most businesses have already learned not to rely heavily on a single supplier, or are pivoting away from overseas suppliers to source goods or materials closer to home.
And though it may seem counter-intuitive cashflow-wise, it’s often worth stocking up on core supplies that have minimal storage costs, to hedge against supply delays. Talk to your lender about short-term working capital loans to help with this.
Also think about whether you use materials that are difficult or costly to store, and what the alternatives might be.
Borrow smarter when interest rates and inflation are rising
As interest rates go up, prices will continue to increase, and there are a range of ways you can manage your business to continue its trajectory during these challenges. If you haven’t already, build on the relationship you have with your lender and talk to them about your business and its unique position.
Use your trusted advisers, like your accountant and finance broker to help guide you on the path to growth during an inflationary environment.
Building a strong relationship with your funding partner is vitally important throughout your whole business journey.
Guy Callaghan is CEO of Banjo Loans.