Trade Talk Blog T
he global economic landscape is changing, and as a result, so too do the challenges for importers. In the U.S., while import prices saw a decrease of 0.6% in November of 2022, they were in fact up 2.7% year-on-year. In Canada, the import price index, which measures changes in the prices of goods and services compared to a base year, stood at 173.6 in February 2023, showing a 73.6% increase in import prices since 2000.
With inflation on the rise in many parts of the world, staying afloat can be difficult – but it isn’t impossible. From dealing with higher direct costs to less disposable incomes, importers now need to consider many factors that directly impact their operations while trying to sustain their business. By following best practices and using smart strategies to manage costs, you can continue to succeed even during these uncertain times.
How does inflation directly impact importers?
Large price fluctuations due to high inflation rates can make it difficult for individuals and businesses alike to plan ahead and budget accordingly. Inflation leads to an increase in the cost of raw materials and other goods. This can be especially problematic for you as an importer, as you often have limited control over the prices that your suppliers charge. Additionally, due to inflation, the value of imported products can be decreased by the time they reach their final destination, leading to a potential loss in revenue. And if the country’s currency weakens due to inflation, it could become more expensive for you to purchase foreign goods and materials.
10 Tips to How Importers Can Manage Inflation
As an importer, you’re not only considering how the rising prices of raw materials influence purchasing and sales. Inflation can also lead to delayed orders, problems with shipping, and capacity constraints due to budgeting issues. To help you stay afloat while dealing with rising inflation, here are nine tips you should consider:
1. Consider consumer trends and behaviors
By paying attention to consumer trends and mapping out their purchasing behavior, you can easily predict demand for your goods. With that knowledge, you can plan manufacturing, inventory, and even procurement of raw materials to better meet consumer demand. In the long run, this will save you money that would have otherwise been lost.
2. Devise alternative plans ahead of time
Due to increased direct costs of raw materials, transportation, and labor, shipping and storing your goods has become more expensive. Whenever possible, develop scenarios based on the best, worst, and most likely outcomes and devise solutions for each of them. It may not be possible to consider all scenarios ahead of time and plan accordingly, however, set up backups to deal with problems such as a shortage in labor, delayed shipping time, and limited storage space.
3. Avoid high-interest rates
In an attempt to curb inflation, many banks are increasing their interest rates, and for an importer, this undoubtedly impacts your ability to take out a loan when needed. You can make more informed budgeting decisions to get you through these tough times by managing your budget. Keep an eye on your resources and adjust your business needs accordingly in response to the market’s supply and demand.
4. Monitor inflation levels
Regularly assess and monitor inflation levels. This can help you adjust pricing and inventory levels accordingly. Keeping an eye on the current economic climate can help you anticipate future changes in demand and costs.
5. Seek out different suppliers
Consider finding alternative suppliers. Shopping around for new suppliers is a great way to secure better deals even when prices rise. This could ultimately lead to more cost savings.
6. Adjust your pricing as needed
Adjust pricing structures to reflect changes in the marketplace. During times of high inflation, it might be necessary to adjust pricing structures in order to remain competitive and stay afloat financially.
7. Negotiate payments
Negotiate payment terms with suppliers. Flexible payment terms with suppliers can provide added financial stability during inflation times, as well as more control over cash flow management.
8. Check out financial options
Take advantage of financing options. You should explore available financing options that could help offset the rising prices of goods and services associated with your import operations.
9. Focus on quality instead of price
Although it is important to keep costs low, it is also important for importers not to compromise on quality just because prices are rising. This could lead to customer dissatisfaction and lower profits in the long run.
10. Consult a customs broker
A customs broker can easily help you maneuver the ins and outs of your import operations. This is especially relevant during inflation since brokers are well-versed in customs laws, regulations, and even methods to manage import costs while keeping your business running.
As an importer, you can stay afloat during periods of inflation by leveraging your purchasing power. You can buy in bulk when prices are low or negotiate better prices from suppliers to reduce the cost of goods. Additionally, you can take advantage of hedging strategies such as futures contracts to reduce your exposure to currency fluctuations and protect yourself against inflation pressures. You can also use various forecasting techniques to anticipate changes in the market and adjust your supply chains accordingly. Finally, it would help if you kept a close eye on economic indicators and government policies that might affect the pricing of your goods in order to better prepare for any potential inflationary conditions.
How GHY Can Help You
At GHY we are committed to helping you save money on your imports. Our experienced team of customs brokers and concierges will handle all your import needs and advise on how to better manage your business, saving you time and money in the long run.
We also provide full-service solutions for managing, tracking, and filing all required paperwork associated with international trade. This ensures that all processes are handled efficiently and accurately so that your shipments arrive on time and comply with applicable regulations. With GHY at your side, you can rest assured that you’ll receive the best service possible at a competitive rate. Book a meeting with one of our Trade Experts today!