The COVID-19 pandemic has affected business in many ways. It has changed how customers shop and how stores operate. Some industries have been hit hard, while others have flourished. Our industry has seen an overall increase in sales: some big box stores have seen growth of over 30% and 106% growth in digital sales.
However, there is another side of the coin. Hardware stores need more inventory and new products to support the sales growth, which has led to an increase in the volume of shipping and manufacturing. Combine this with the increased difficulties in organizing the supply chain and you get a recipe for disaster.
Then add skyrocketing costs of materials due to their scarcity. At Ideal we’ve seen some of our products getting about a 160% price increase since last year.
Grim, isn’t it? The more we sell, the more it costs us. We’ve done what we can to absorb some of these costs, but we’ve also had to pass some of it along to our clients. That’s inevitable.
Shipping companies have started demanding a premium just to bump shipments up to the front of the line, which still doesn’t guarantee that they’ll be shipped on time (side note: they rarely are). We (Ideal Security) have seen our shipping rates explode by 300%, not including additional premiums as high $5000 US. At the same time, delays have grown to between 3 and 5 weeks for LCL, with full containers experiencing even longer delays.
This means that you, our customers, have experienced or will experience delays in getting our inventory.
So, what can you do to mitigate the impact of the delays and the price increases?
Here are 5 things you can do right now.
- Focus on higher dollar items
When it comes to product selection and placing your orders, prioritize higher dollar items. Shipping costs are based on cubic meter. A high value handle set costs just as much to ship as a low value handle set. With stimulus checks in peoples’ pockets, home improvement on the rise, and strong demand, you can reduce the impact of freight increases by shifting customers to higher value items.
- List new items where historical comparison doesn’t apply
You will have to pass down your cost increase to your customer, there is no way around it, and they’re going to notice; especially if it’s an item that they’re used to seeing at historically low prices. Putting in new items, presenting them as upgrades with added value, can make the cost increases less noticeable.
- Leverage online exclusive – Smaller packaging = more inventory
If you sell certain products online only, you might be able to eliminate the bulk of retail packaging retail packaging and ship them in smaller boxes. That can help you fit more units of the same product into the same container.
- Leverage online exclusive – Wider inventory range
With shipping and production delays, maintaining inventory is a challenge – particularly in-store where your planograms are set and an empty hook is an empty hook. Take advantage of your direct fulfill DCs if you have them, or better yet lean on us! We have a wide catalog of equivalent but alternative products and finishes. Inventory challenged items can be swapped for other items with more stock.
- Stock up (aka here today, gone tomorrow)
A bigger order can provide you with a discount from your supplier. An earlier order can secure inventory that’s available now but might not be tomorrow. Out-of-stock means lost sales if your competitors are in-stock. Customers will shop alternative brands, and may not come back. Make sure you’re in a sustainable stock position to manage the increase in demand.
Luckily, we may be seeing some light at the end of the tunnel. COVID case counts are lowering day by day and the widespread adoption of vaccines promises an (eventual) return to normality (or something close).
Hopefully, the supply chain will return to normality as well.
In the meantime, you have 5 ways to mitigate the impact of the delays and the price increases!