The consumer price index went up 7% in 2021, which according to Bloomberg was the  largest 12-month gain in almost 40 years.  This really hit home last week when I heard that our local dollar store just changed it’s one-size-fits-all price from $1 to $1.25.  And while this year’s rate is predicted to be 7.5% – not the 25% that the dollar store has instituted – it’s clear that inflation is going to impact us all.

There are many causes for this economic trend, including increases in energy costs, shortages of labor, challenges in shipping, and continued disruptions in the supply chain.  These are all negative factors for independent retailers – but another cause of inflation is increased demand for goods, which is a positive trend.  Many of us have experienced consumers being eager to shop as the pandemic (hopefully) eases.

Increased wholesale prices were the first indication of inflation in our industry, with many of our vendors adding freight surcharges or raising prices. While stockpiling goods purchased before prices went up provided a temporary hedge against increases, the fact is that consumers should now expect to see higher prices.  This will be happening across the board, and hopefully our economy is robust enough that shoppers can still afford their purchases.

But a major concern regarding inflation is its impact on your store’s bottom line. Fixed expenses such as rent may go up, as well as variable costs such as shipping.  Now is a good time to look carefully at your budget to see what factors are within your control.  You might need to reduce hours, or make your space smaller. Negotiating a longer lease with your landlord may help, as well as looking into energy saving options that will trim your utility bill – and help the environment at the same time. 

In order to save on shipping costs, look for vendors who offer free freight, or are located closer to your store. Consolidating your buying so that you are placing fewer but larger orders may also help reduce shipping expenses.

Keep in mind that some of your sales growth in 2022 may come from the increase in prices caused by inflation.  In order to remain profitable, you’ll need to keep a close eye on everything else that goes up in price during this time of economic change.

Happy retailing, 

Carol “Orange” Schroeder