It’s been a tough couple of years for retail. From lockdowns and store closures to density limits and delivery delays, retailers have had to overcome challenge after challenge throughout the pandemic. And just when it started to look like we were coming out the other side, the ripple effect of the pandemic is once again impacting retailers with a significant increase in operating costs.
From supply chain delays making some stock impossible to source, to increased fuel surcharges and ‘emergency surcharges’ due to reduced transit, and the ever increasing costs of materials due to lower supply, retailers’ costs have gone through the roof; ultimately leaving many with no choice but to raise their prices to cover costs. But with the cost of living rising sharply and Australia on the brink of another possible recession, the timing couldn’t be worse for consumers.
So how can retailers up their prices without losing all their customers?
Communication and transparency
While communication is always central to maintaining strong customer relationships, well thought out communication around price changes can be make or break when it comes to customer retention. The reality is that raising prices is never an easy decision, so the best play is to be transparent about the reason prices need to rise at all. Is it because shipping costs have gone up? Is it because the manufacturer is now charging more? Whatever the reason, honesty is absolutely the best policy in this situation. While customers aren’t necessarily going to be happy about having to pay more, if they understand the reasoning behind the decision they’re more likely to be forgiving.
Where possible, it also helps to give an advanced warning of upcoming price changes. An example would be sending an EDM several weeks beforehand, and more frequently on other channels such as social media leading up to the deadline, helps to make sure any upcoming price changes have been clearly communicated. This not only prepares customers so they’re not shocked next time they go to purchase their favourite items, it also gives them the opportunity to stock up on their favourite items at the current price.
Demonstrating value beyond price
Although price is a huge selling point for customers, it’s certainly not the only factor driving purchasing decisions. In fact, recent research shows that core values such as environmental friendless or a brand’s stance on certain social issues can also impact purchasing decisions, in addition to more traditional values such as product quality or customer service.
When there is no other choice but to raise prices, it’s the perfect time to remind customers about all the other reasons they shop with you. Perhaps it’s reiterating the company’s sustainability initiatives or reminding them about the charities they support with every purchase. Perhaps it’s time to remind customers of key business promises, such as a quality guarantee, an easy returns policies, fast delivery options or fantastic customer service. Or perhaps your store is the exclusive stockist of a popular brand, or a specialty retailer with a range of niche, hard to find items. Whatever it is that makes your store unique, or whatever values your business champions, should be communicated clearly and loudly in any communications around price changes. After all, most loyal customers are there for more than prices, so remind them why they keep coming back and they’ll likely continue to do so.
Riding the wave
It’s a tough climate for retail but it’s also a tough time to be a consumer. The rising cost of living is high on the agenda, with consumers forced to cut back on discretionary spending in order to make ends meet. And the inevitable reality is that retailers may lose some customers if they introduce a price hike. Although – it’s also worth noting that customers may disappear with or without price changes, simply due to having to cut back on overall spending.
The good news for retailers is that many shoppers have a desire to support Australian businesses; with one study showing that 73% of consumers say they’re willing to pay more for a product if they love the brand. Although price will always be a factor in purchasing decisions – particularly during times of economic uncertainty – a customer’s emotional connection to a brand can be just as important. By being open and honest around price changes, demonstrating value for money, and reminding loyal customers why they love to shop with you in the first place, retailers will no doubt be able to help cover the ever-increasing cost of doing business while still managing to keep their customers.
Rob Ranoa is founder and owner of Hypop.