The Economy is Tightening, and Business Conditions are Softening - are you Surviving or Thriving?
We have stated from the outset of Covid that we were facing a bottom-up recession, and this is slowly starting to look remarkably accurate as we see the increasing emphasis on the pressure of the current cost of living crisis.
The Reality for Business Owners
As business owners, the demographic we associate with on a day-to-day basis may not necessarily support all the hype as many of our friends, families, and networks are seemingly unaffected and almost constantly overseas. But the fact is, there is increasing evidence of the continued pressure from higher costs across the entire spectrum with increasing difficulty in passing these through to higher prices.
The Need for Adaptation
Businesses need to work harder and smarter to compensate to protect margins, and this is creating a constant strain on management.
Ten Consistent Trends We're Observing
Deferral of Capital Expenditure
Deferral of capital expenditure is being offset by extending the economic life of existing plant and equipment wherever possible, with a resulting increase in maintenance expenditure.
Rising Inventory Levels
Rising inventory levels are commonly associated with softening sales and, if sustained, will result in the lay-off of staff if this continues through the first quarter of the 2024/25 financial year.
High Street Retail Adjustments
Having returned to business as usual after Covid, high street retailers are not hiring, and hours are being reduced through the shortening of trading hours by opening later, closing earlier, and not opening on Sundays and public holidays while sales are being sustained by deeper and earlier discounting.
Scrutiny of Expenditures
There is a review of every area of expenditure, particularly recurring costs, which are consistently being tested against the market in the lead-up to renewal.
Housing Affordability
There is an increasing cohort of people that see housing ownership as out of reach, who are still happy to spend, but they need to be understood and reached.
AI is Transformational
As true as this is, the real sense of urgency should apply to businesses relying on traditional online digital marketing strategies as the dynamics are rapidly changing.
Growth in Motor Vehicle Fleets
The odd twist is the continued growth and modernisation of motor vehicle fleets, particularly heavy vehicles, defying the wider evidence of tightening economic conditions.
Sensitivity to Market Segments
Clients that are continuing to grow sales and sustain margins are very sensitive to the market segments they target and continually assess and test their competitive advantage within specific segments.
Understanding B2B Customer Needs
In the B2B market, the bottom-up nature of the economic situation makes it critically important to understand your customers' customers and the flow-on effect of their needs.
Customer Feedback
AI, chat bots, numeric ratings and net promotor scores are dehumanising customer communication and providing minimal added value.
Leveraging Customer Insights
The firm has had considerable success in helping businesses understand their customers’ requirements through research and interviews, and there is no better time to get closer to your customers than during tightening times.
The Importance of Effective Supplier Relationships
Many clients gauge the current economic climate by the number of suppliers contacting them for a “catch up.” If those suppliers wanted that catch up to be more effective, they could have it undertaken independently of their normal representative, making them stand out from their competitors and providing valuable insights.
If you would like to know more about how to leverage any of the areas we have highlighted, please reach out to your nem Partner who will be happy to assist where they can.