I repeat ... Inflation is coming
Randy Eller -- Home Accents Today, 4/14/2011 6:38:57 AM
N AUGUST OF LAST YEAR, I predicted in this column that we would see inflation this year due to significant changes that are happening in China relative to the factories that serve this industry. Those comments reflected purely on China issues and suggestions I made for how to prepare for price increases because of those issues.
Unfortunately, recent world events have caused the inflation probabilities to dramatically increase, and we're going to have to be prepared for that as well.
Specifically, recent political turmoil throughout the Middle East is causing short-term, and probably long-term, disruptions to the oil supply.
Secondly, the recent natural disasters and subsequent human catastrophes in the great nation of Japan will also affect energy issues for probably years to come. Japan's need for oil will increase as it builds back from the destruction, and obviously its nuclear energy supply will be curtailed. Further, as we are already seeing, the failure of "fail-safe measures" in the nuclear plants in Japan is causing governments around the world to rethink their nuclear policies.
All of the above means the world will need more oil for the foreseeable future, and this will definitely affect inflation.
For the American consumer, at any income level, the two most immediate and visible signs of inflation are very simple metrics. Filling up the gas tank in their vehicles and buying food for the family are weekly, if not daily, reminders that prices are going up. We can expect this hit to families' cash flow to scare them and make them pull back on spending for non-essentials.
My earlier August column suggested that a solution for the China problem was for vendors to diversify to other countries. However, the issues discussed here will be felt worldwide.
So, whether you are a vendor or a retailer, what can you do to aggressively address these issues and keep your customers spending?
First of all, from top to bottom - including your marketing, advertising, displays and pricing of goods - your business model needs to literally shout at the consumer that you are "AFFORDABLE."
You need to work hard to let the consumer know you are not living in a vacuum, that your fuel and food prices have gone up as well, and you understand that affordability is the key to life in these times.
Additionally, think about doing things that are "out of the box" in terms of promotions.
If you are a vendor, think about offering a free plane ticket or gasoline credit card to your key retailers to help them with expenses in coming to markets. These days, it might just beat the hell out of show specials. Speaking of show specials, don't make them wait until markets. Think of instituting some "road specials" to keep their stores fresh. There is no better thing you can do as vendors in this day and time than to help ensure that retailers' shelves stay fresh.
If you are a retailer, again, do something different to get the consumers' attention and show them you are sensitive to the times. Instead of having a typical 20% off sale or whatever, consider giving away a $20 prepaid gas card with a $100 purchase, or perhaps a $20 gift card to a local restaurant to help your customer treat her family to a night out.
Finally, don't forget the tried-and-true things that have always worked in our industry. In times of turmoil and nervousness, the top - selling categories of product have always been spiritual or inspirational goods and products that remind people of friends, family, children, grandchildren and pets. People want, and need, to have things that are close to their heart when things are tough around the world.
I also cannot end this column without mentioning again our friends in Japan. Particularly in the early days of this industry, the people of Japan, in their factories and creativity, were very instrumental in helping this industry to succeed. Those of you who have been around as long as I have are certain to remember that some of the greatest products and ideas in our industry came from Japan.
I urge each and every one of you to find a way to donate to any organization of your choice to help Japan in her time of need. We are the gift and home industry, and no one should understand better than we do the emotional loss of a home or the life of a loved one. Let's step up and treat others as we would want to be treated if this had happened in our land.
Randy Eller can be reached at reller@ellerent.com
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