Finance

Inflation: The Enemy of Economic Growth

Published

10 months ago

November 22, 2022

admin

Sander Roose, Founder & CEO of Omnia Retail

Inflation has been eating away at profits for many retailers. The Consumer Price Index (CPI) measures the annual change in prices paid by consumers, calculated as a weighted average of prices for a basket of goods and services representative of aggregate consumer spending. When the pandemic began, global inflation was decreasing, and the downward trend persisted throughout the early months of the crisis. However, rising costs since late 2020 have progressively driven inflation upward.

In September, the Eurozone aggregate inflation rate was at 10%, well above the ECB target of 2%. Many retailers have responded by raising prices, shrinking package sizes, cutting promotions, or increasing prices. Integrated dynamic pricing and online marketing automation solutions are required to assist retailers to regain control, saving time, and driving profitable growth — optimising pricing and maximising returns from all channels.

The Essence of Capitalism and The Financial Crisis

Aline Schuiling, Senior Economist for AMRO Bank, speaking at Omnia Retail Price Points Live, simplifies it by saying, “Prices in a market economy will always rise and fall; if you spend one euro today, it is not the same euro you spent yesterday.” Food and energy have been the most significant contributors to high inflation rates since mid-2021, and Schuiling provided an eye-opening statistic, “In Europe, energy prices are 40% higher than they were a year ago.”

While central banks can impact the domestic economy, food and energy prices are affected by external events such as the war in Ukraine, with Ukraine being a major global agricultural product supplier, as well as Russia’s halted fuel supply to the West. High energy prices were also caused by resource mismanagement, due to the gas supply not being regulated during the pandemic, resulting in global shortages. Global supply bottlenecks have had long-term impacts on inflation rates, because of lockdowns.

Governments around the world are attempting to combat rising inflation through subsidies. “The good news is that European governments are contributing to offset the cost of gas to protect households and businesses,” says Schuiling. Global interest rates have also increased in an attempt by central banks to counter inflation. Increasing borrowing costs should deter consumer and business spending and make banks more cautious in lending decisions. The FED began hiking interest rates in March 2022 and has already increased rates by 300 basis points; the ECB began hiking by 125 basis points later and is expected to continue aggressively until the end of 2022.

Smarter Strategies to Navigate Inflation

A Dynamic Pricing Solution allows retailers to automate pricing strategies efficiently and at scale, no matter the complexity or assortment size. These solutions empower any pricing team with a flexible rule system. It allows for experimentation with new strategies on a product or category level while remaining flexible and agile with quick response times. Furthermore, there is no need for IT development time to make fast price changes. An integrated solution allows retailers to focus on strategy with end-to-end automation, allowing employees to use their time more efficiently by automating daily operational decisions.

It saves retailers time through automated competitor data collection, price calculations, and price updates in their ERP. This allows retailers to concentrate on strategic choices that help grow a business. Finally, these types of solutions deliver better customer relationships as it creates clear pricing policies across an entire organisation. Moreover, pricing software delivers price elasticity insights and generating exports to feed external systems with pricing information.

Other strategies available to retailers include leveraging consumer psychology to increase sales. Speaking at Price Points Live, Patrick Fagan, co-founder of Capuchin Behavioural Science, gave a clear example: “Guinness, the beer brand, saw an increase of sales by 25% just by creating the Guinness beer glass and having large cardboard signage in the aisles. These act as slight nudges to influence a consumer’s purchase behaviour.” Simple but effective strategies such as these allow retailers to take back control when inflationary pressures are increasing.

Inflation, Interest Rates, and An Impending Recession

Inflation is forecasted to rise in 2023 but should decrease in 2024, returning close to the ECB’s target. For the average consumer, this means higher bonds and mortgage rates. All while real wages are collapsing — as inflation rises, and wages remain stagnant. While governments try to assist with subsidies, this does not go far enough to bridge the gap created. Retailers require a dynamic pricing solution to thrive during economic downturns.

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Business

In-platform solutions are only a short-term enhancement, but bespoke AI is the future

Published

14 hours ago

September 27, 2023

editorial

By Damien Bennett, Global Director, Principal Consultant, Incubeta

If you haven’t heard anyone talking about artificial intelligence (AI) yet, then where have you been? Conversations about AI and its advantages to society have been a key talking point over recent months, with advances being made in the generative AI race and ChatGPT opening a whole plethora of possibilities. Many have highlighted the advantages of AI, but notably it’s ability to create human-like content.

But these discussions have only scratched the surface of what AI is capable of doing. It is for far more than just essay writing, adding Eminem to your rave and photoshopping dogs into pictures.

In marketing, we have been using AI for years, for everything from analyzing customer behaviors to predicting market changes. It’s enabled us to segment customers, forecast sales and provide personalized recommendations, having a huge impact on how our industry works.

It is even, for the more savvy marketers of the world, becoming a key tool in maximizing budget efficiency – which is apt, considering over 70% of CMOs believe they lack sufficient budget to fully execute their 2023 strategy.

Now, as AI becomes more intelligent, the number of efficiencies it can unlock continues to rise. Not only can it help brands get the most out of their available resources and identify any areas of waste, but it can also help highlight new opportunities for growth and maximize the impact of your budget allocation.

The trick, however, is to veer away from the norm of using in-platform solutions with a one-size-fits-all approach and create your own, bespoke solutions that are tailored to your business needs.

Pitfalls of in-platform solutions

In-platform solutions aren’t by any means a bad thing. In fact, built-in AI tools have become increasingly popular, owing to their ease of integration, user-friendly interfaces and minimal set up requirements. They come pre-packaged with the platform, offering the user the ability to leverage AI technologies without the need for in-depth technical expertise or the upfront cost of building a solution from scratch.

However, the streamlined and accessible nature of in-platform AI solutions comes at the expense of complexity and customization. They are designed to serve a broad user base, but for the most part are built using narrow AI solutions with predefined features and workflows.

This makes them great for assisting with common AI tasks, but they lack the flexibility to tailor functionality towards unique business requirements or innovative use cases, limiting the potential efficiencies and cost savings that can be unlocked. Additionally, if a business’ competitors are using the same platform, they are probably using the same AI solution, meaning any strategic advantage gained from these will be reduced.

Bespoke AI solutions, on the other hand, may carry a higher initial investment – but can offer a significantly more attractive ROI over a short amount of time.

Why customized and adapted AI is the key

The difference between bespoke AI and in-platform solutions is similar to that between home cooked food and a microwave meal. Yes, it is more time consuming to prepare, and yes it likely carries more of an upfront cost, but the end result is going to be far more appealing and will carry more long-term value (financially… not nutritionally).

That’s because bespoke solutions, by nature, will have been tailored to address your brands specific needs and challenges. These custom-built tools allow for much greater efficiencies by streamlining workflows across different channels, automating more complex tasks, and providing deeper, more relevant insights.

The increased level of optimization can significantly improve productivity and reduce operational costs over time, offering a higher ROI. The increased flexibility of bespoke AI also allows brands to implement innovative use cases that can significantly differentiate them from their competitors.

The data analyzed can be specifically chosen to match business requirements, as can the outputs of the AI tool, providing a significant advantage when understanding and acting on the insights provided.

Additionally, these tools are, by nature, more scalable. They can be updated, upgraded and expanded as needs change, ensuring they continue delivering value as the business grows. They can also be designed to integrate with any existing IT infrastructure, from CRM systems and databases to marketing platforms and sales tools – leading to more efficient and effective decision-making.

Managing finances with AI

It’s no secret that AI in marketing automation has, and will continue to, revolutionize the way marketing is done. It has a bright, if slightly terrifying, future and can help CMOs to unlock new efficiencies, maximize the impact of their budgets and increase their ROI. And as this technology becomes more advanced, its impact will only increase.

But we already know that…and so does everyone else.

So, in order for businesses to make themselves stand out from the crowd , they must look to fully adopt the power of AI. Creating a customized and unique AI solution could be the way to set yourself apart from your competitors. A bespoke AI tool can provide brands and businesses with features unique to them and their business needs. As a result, companies will benefit from more useful data and better results to make more data-driven decisions for their business. Ultimately, this will help brands to maintain a competitive edge over their competitors, deliver ROI and most importantly optimize their budgets.

Business

Is your business suffering with Fintech FOMO?

Published

2 days ago

September 26, 2023

admin

Tom Kiddle, Chief Commercial Officer at Equals Money

It’s a challenging time for businesses of all sizes, but the past three years created storms that are particularly hard for SMEs to weather. For businesses dealing with shrinking margins, while a weakened pound is making international purchases more costly, it’s a scary time.

For many businesses this meant initially reigning in any unnecessary costs, reducing investment in anything deemed as a ‘nice to have’, and focusing on keeping the lights on. However, despite not being out of the woods in terms of economic challenges, this year many SMEs have their eyes on growth.

While some might have been buoyed by the news that the UK narrowly avoided a recession at the end of last year^[1], data shows businesses were already making investments before this news was released. In fact, UK business investment rose by 4.8% in Quarter 4 (Oct to Dec) 2022, coming in at 13.2% above where it was during the same quarter in 2021^[2].

So, where are SMEs putting their cash? As well as predictable spending on IT equipment, machinery, and transport^[3], businesses are also putting more funding than ever into technology investments – a trend that isn’t slowing down anytime soon. UK tech investment is set to grow at its fastest rate in over 15 years, both in terms of budget but also headcount^[4]

Tom Kiddle

UK businesses are clearly seeing the real opportunity that technology, in all its various forms, presents to their operations. This may also be bolstered by the fact that tech investments are potentially more cost-effective now that the government has made recent changes to R&D tax relief, which sees things like cloud computing and data included in expenditure categories^[5]. When it comes to revamping legacy systems and introducing Fintechs that offer businesses a smarter, easier, automated way of doing business, investing in technology can increasingly feel like a no brainer.

However, it’s rare that a one size fits all solution exists for businesses. What works for your competitor may not offer the same benefits to your organisation. In a world with so many risk factors, making smart investments that are aligned to your individual business goals is key.

Tom Kiddle, Chief Commercial Officer at innovative money movement solution Equals Money, explains four ways businesses can reap the rewards of smart tech investments:

1. Measurement

Can you measure the impact it will have on your business? It doesn’t have to be monetary, but if it gives you efficiency, visibility, or certainty, these can have measurable tangible impacts to your top and bottom line.

2. Insight

Does it tell you something you didn’t know before about your customers, your employees, your suppliers, and their behaviour? What could you do with that information? Often, businesses lack critical insight on their key drivers, and understanding those can open up new opportunities.

3. Action

Pretty charts and graphs make for good reading, but make sure you’re taking action with your new piece of tech. Setting accountability for action from your latest investment will drive your business to achieve a return on that investment and ensure it doesn’t sit on the shelf.

4. Adoption, adoption, adoption

Often, the latest tech trend may seem like a great investment to the motivated few, but look more broadly: if your intended internal target for your new tech fails to adopt the new practice, you won’t achieve the return promised. Also, more likely than not, you’ll frustrate both the key supporters of the new product and those you’re imposing it on.

Innovative technology, particularly in the finance space, can transform the way you do business, but avoid being lured in by solutions that don’t align to your individual needs. Good suppliers should always take the time to give an honest appraisal of whether their product is right for you and should leave you feeling empowered to devote time to what matters most – growing your business.

^[1] HR Solutions, 2022 ^[2] The Guardian, Feb 2023 ^[3] ONS, Dec 2022 ^[4] ONS, Dec 2022 ^[5] Nash Squared Digital Leadership Report, 2022 ^[6] BDO, 2023 [1] The Guardian, Feb 2023 [2] ONS, Dec 2022 [3] ONS, Dec 2022 [4] Nash Squared Digital Leadership Report, 2022 [5] BDO, 2023