The cost of doing business is increasing. It’s mainly due to the pandemic, stretching supply chains and bringing manufacturing and sourcing closer to home. But, it’s also because governments are clamping down harder on cheap foreign labor and polluting but cheap materials. The green agenda that governments are touting is going to impact the cost of making products and that in turn will affect your price. Rather than driving customers away from your brand, you could do any of the following to offset the rise in the cost of doing business.
Work with local brands
One of the reasons why so many companies have chosen to take their manufacturing abroad is because in the West, it is seen as expensive to work with such brands. However, you may not have a choice anymore as customers are more aware of the business world. They do not want to buy products that have been made by sweatshops, made using techniques that harm the local environment etc. So, now is the time to begin sourcing your raw materials, manufacturing needs and storage demands at home. Work with local businesses and negotiate favorable terms that will benefit both parties. Long-term contracts will be more mutual and less in favor of one party or the other and thus lower costs for a more predictable length of time.
Perhaps the biggest cost of doing business is your employees. Paying the salaries of employees is by far the largest expenditure any business faces. To offset some of your additional costs regarding increases in pay, promotions and bonuses, increasing productivity could make your employees more affordable. To improve long-term productivity, invest in the internet of things, so all platforms, products and services are connected to each other. Digital productivity is also improving, as just in the US alone productivity rose by 10.6%. All the while employees are working from home. Making your software remote-work-friendly is, therefore, a must.
Rather than offset the price completely, you could choose to optimize your profit by targeted increases in products. For your most popular products, you should increase the price right now, before the additional increase in costs hits what you need to create that product. For example, if you have a popular dining table made out of glass and metal, increase the price and fix it in place for the foreseeable future. This gives your customers time to adjust to the price rather than suddenly piling it on as other brands inevitably increase their prices too. Supply chains are being stretched and changes to them are increasing costs across the board. A targeted increase of your products that are expensive and are popular, prevents it from looking as if you are taking advantage of the market squeeze.
The cost of doing business is increasing because of the pandemic’s impact on supply chains. The shift in a more ethically aware customer culture is also a powerful new force to be reckoned with. Do these things to offset your costs without driving customers away.
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