Cutting Costs

Strategies to cut costs during inflation also raise customer loyalty. Global trade hit a record high of $28.5 trillion in 2021, an increase of about 13% from before the pandemic.

But commerce growth slowed in 2022. And as the war in Ukraine contributed to surging oil and gasoline prices, the cost and time associated with transporting small packages went up—and not just in the region. Several countries like China, The Netherlands, Germany, and Italy import staples like fuel, oil, wheat, wood, and metals through and from Russia, so prices are going up along with lead times worldwide.

Product shortages are putting greater financial strain on an already-weakened economy. Interest rates and borrowing costs are also rising, along with commodity prices. Exaggerated growth during the pandemic also contributed to overzealous investments in hiring by some direct-to-consumer brands.

Now higher costs and slower business is making it difficult to keep up with expenses. The result: significant layoffs. Fears of recession loom large, souring investor sentiment,23 which will be a challenge for 73% of brands that are planning to rely on external investors this year.

As brands and buyers continue to see their spending power decrease in light of inflation, both are finding ways to reduce expenses. Shoppers are doing that by seeking cheaper options—which means the 81% of brands that plan to raise their prices (or already have)—need to emphasize their value to keep customers. For some brands, raising prices has meant introducing new products at a higher price, instead of making existing products more expensive.

Others are making plays for long- term loyalty by freezing prices or introducing budget-friendly product lines. Savvy brands are betting on their customers by investing in them now, in the hopes it pays off in a future recovery..