IF WE’VE LEARNED one thing from the last two years, it’s that no one can predict the future. As I write this, we appear to be heading into a world that is starting to come out of the pandemic that has gripped us for the last two years. Many countries are beginning to drop their vaccine mandates, and the levels of hospitalizations and deaths are starting to show some signs of dropping.
We are moving into a new world that will never be the same as what we had before. Fundamental changes introduced as a result of the pandemic may be here as part of our future for some time to come. Some aspects that have been introduced, not all of them bad, may never be removed at all.
Perhaps the closest comparison would be the long-term effects we saw as a result of 9/11, but this seems destined to go so much further. We are entering a new world where divisions need to heal, and how that will happen remains to be seen.
One of the biggest impacts that many of us are dealing with is economic. Firstly, we are grappling with a level of inflation that was initially described as temporary by many central bankers but now seems destined to stay. This will impact the purchasing cost for many of our core products, including the very items we sell. It may also carry across into operating costs such as wages, where it seems ongoing inflationary pressures will start to create a push for higher wages.
The second area that may be seen to cause an issue is in our exchange rate. The large-scale increase in government debt because of Covid has contributed to inflation but has also served to put pressure on the dollar. Where there is a surplus, we see a drop in price, and the additional printing of currency over the last two years has seen the markets start to question the value of a dollar when compared to a basket of other currencies. With many of the average stores’ core purchases sourced from overseas, this may serve to drive up the cost of the things we sell, a further factor leading to inflation.
Thirdly is freight. Nothing arrives in-store without something having to be paid to someone to transport it, and as media reports have indicated, much of the cost of freight across the world has increased exponentially in recent months. Add in the ever-rising cost of fuel and gasoline, and we can see that raw materials alone are not the only issue when it comes to the items we buy.
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The impact of all of this is upwards pressure on pricing. If we have to pay more for our goods, and we have to pay more for our staff, then we need to get more from our customers. This can be easier said than done. One positive of the last two years is that much of our competition has been unable to function effectively, leaving us with a bigger slice of the discretionary spending pie. Forbes estimates that the travel industry was worth almost 9 trillion dollars to the global economy in 2019. Remove this number for two years and, even allowing for a reduction in spending overall, many store owners have benefitted by travel no longer being an option for customers to consider.
This seems likely to change. Many are already traveling again, and as the year moves on and more countries drop their Covid travel restrictions, it seems likely this pent-up demand will be unleashed. Any attempts to increase pricing will be done against a backdrop of travel deals thrown around by hotel chains, airlines and cruise ship companies that have a vested interest in getting people back into the travel habit.
The challenges ahead are far from insurmountable for the average store owner, but they need to be acknowledged and planned for. If there is one thing we can be certain of, it won’t be business as usual for the foreseeable future.
