How Inflation Is Impacting Retail Businesses and What You Can Do About It

November 20, 2022 - 12 minutes read

Your guide to navigating the inflation situation.



Inflation is on the rise, and it’s impacting retail businesses everywhere. The rate of inflation is at its highest rate since 1981—and it’s starting to affect the way people shop.

The good news is that consumers are still willing to spend, with industry experts projecting up to an 8% rise in retail sales in 2022.

But while retail and eCommerce sales are still pretty buoyant, further uncertainty and the looming threat of recession could create issues for retailers in the coming months or years.

By understanding the situation and knowing how to navigate it, you can steer your retail ship toward a bright and profitable future.

Let’s dig into the inflation situation and what you can do to weather the storm.

How inflation impacts retail

Inflation is an economic factor dictated by the price of goods and services within a certain economy. Some of the key goods or services that impact inflation rates are consumer products, food, energy, transport, and medical care.

Within the last 12 months alone, the overall price of food rose by 9.4% (meat, eggs, and poultry saw the most significant rise), and piped gas shot up by 22.7%. Meanwhile, gasoline inflated by a head-spinning 48%.

These tough economic shifts are collectively contributing to the record-breaking rate of inflation we’re facing today.

Retailers are feeling the squeeze

As a retail or eCommerce business, it’s likely you’re feeling the squeeze. In addition to increased operating costs and many consumers realigning their shopping priorities to stay above water (overall spending power across generations is down), the current inflation situation is creating increasingly choppy waters because of:

  • Growing supply chain costs and shortages making fulfillment more challenging, expensive, and inconsistent
  • Product, material, and B2B service price increases making every element of your operations more costly
  • Shrinking profit margins as a result of various increased costs and overheads
  • Price-sensitive customers with less spending power. If you inflate your prices to restore your margins, you could drive consumers away. It’s a tough juggling act and a vicious cycle.
  • The obligation to increase wages to ensure your staff can make ends meet, coupled with labor shortages

This melting pot of inflation-induced issues is making running a successful eCommerce and retail business that much more difficult. But it’s possible to navigate these choppy waters effectively and come out on top.

How to navigate the current inflation situation

Now that you’re up to speed with the current drivers of inflation and how it may be impacting your business, we’re going to explore a mix of practical ways you can navigate your way through these tough economic changes.

Keep your finger on the pulse

One of the best ways to remain responsive and adaptive when it comes to dealing with inflation is keeping your finger on the pulse of the retail industry specifically but also the economy more broadly.

By carving out enough time to check in with retail trade publications, financial media, and other news outlets, you will have a working knowledge of constant economic change. You’ll be ready to make strategic or operational tweaks when new trends emerge while nipping any potential budget-sapping issues in the bud.

Here are some publications and sources to keep your eye on:

Stay customer-focused

To keep your margins healthy, inflating your prices slightly is inevitable. But by offering your customers as much personal value as possible while establishing yourself as an industry thought leader, you will build customer trust and loyalty.

Get to know your customers by investing in market research and creating buyer personas so you understand exactly what certain segments of your audience want.

When you know how to speak to your customers, you can deliver content that really speaks to them while offering personalized product recommendations, deals, and offers that are likely to suit their needs or interests. The more you can connect with the audience and the easier you make their shopping experience, the more likely you’ll be to raise your pricing slightly without driving customers away.

Read: 10 tips on creating a strong visual identity for your brand to keep your current customers on your side and attract new ones.

Revise your rates, inventory & pricing wisely

When it comes to revising your rates and pricing, there are tricks or techniques to help you make your increases fair and amenable while still making a solid profit.

By looking at the bigger picture and exploring your current suppliers, your existing inventory costs, and, if relevant, manufacturing or material overheads, you’ll be able to make cuts or changes where necessary.

The goal is to improve financial efficiency while maintaining quality. If your partners, suppliers, and products dwindle in quality, you’ll damage your brand reputation, losing your existing loyal customer base in the process. 

In addition to looking at your inventory and supply chain, there are ways to amend or update your pricing strategically. When you do increase prices, it’s best to rely on data and feedback to ensure you’re raising prices in a sustainable manner. It’s also recommended you tell your customers why you’re increasing prices and clearly explain how the increase will still provide them with value.  

Read: Our essential guide to pricing strategies that will boost your store’s revenue to revise your product categories and ensure sustainable success while navigating our current inflation situation.

Optimize your internal operations

Another effective way of cutting costs while boosting productivity is optimizing your internal operations.

You can do this by working with data. Armed with the right retail platforms and tools for processes like eCommerce marketing and inventory management, you will uncover concrete visual insights that will show you where you need to improve your operations.

For example, you might use your inventory management data to measure which products are moving fastest while yielding the least customer return rates. Armed with this information, you can optimize your landing pages and use paid advertising to market the products your target customers are most likely to buy (and keep buying).

Taking the time to strategically optimize your retail or eCommerce business’s internal operations will ultimately reduce running costs while boosting output—a combination that will keep your customers happy and ensure you remain profitable in challenging times.

One of the best ways to optimize your retail business from the ground up (and build solid operational foundations) is by improving your inventory management strategy.

If you want to enhance your inventory management processes and strategy for greater financial and operational efficiency, check out our essential guide, complete with practical tips.

Keep an eye on the competition

Another useful means of staying on the right side of inflation is keeping a keen eye on your competitors. 

In a world where consumers are more price-focused than ever, your competitors’ campaigns, communications, pricing, deals, and promotions can serve as invaluable insights when weathering the inflation storm.

By knowing your competition, you can exploit any campaigns or content gaps they’re overlooking while keeping your pricing and promotions competitive.

To do this effectively, you should sign up for your competitors’ apps or email lists, indulge in a little mystery shopping, and try social listening.

Bonus resources

To help you succeed in this rocky economic climate, here are some extra guides and resources to add to your retail business’s inflation-fighting toolkit:

Final thoughts

“Every problem is a gift. Without problems, we would not grow.”—Tony Robbins, motivational speaker and writer


While the current economic climate is tough, and you’re likely to feel the squeeze from every angle, there’s a profitable light at the end of the inflation tunnel.

By taking action now and doing all you can to prepare for further inflation (or the continual impact of existing inflation levels), you’ll keep your retail or eCommerce business rolling with momentum.

To win on today’s commercial battlefield, you must educate yourself; keep your eye on the industry and the competition; make operational and pricing changes based on informed, strategic insights; and, most importantly, keep your customers at the beating heart of everything you do.

Like most economic trends, things will begin to plateau, and by taking a stand now, your retail business will be all the more responsive, resilient, and profitable.

We wish you the best of luck, and for more business-boosting insights, learn how to scale your business with user-generated content (UGC).