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How agile retailers can keep pace with a volatile fuel price

31 October 2022  |  By Lesaka

South African consumers and retailers have been warned to brace themselves for yet more fuel price increases in November. Volatile fuel pricing is likely to be a part of the landscape for some time yet, with global inflation raging and the war in Ukraine disrupting the global energy market.

Retailers will need to be nimble and innovative to navigate this landscape, says Steven Heilbron, CEO of Capital Connect, a fintech that offers opportunity capital to South African retailers. The impact of a rising fuel price is wide and deep—not only does it directly affect the costs of transporting goods, it stokes inflation across the board.

“Even as the world plans for a net-zero future, oil is still a core component of many products we buy. The packaging products come in, cosmetics, clothing, and even aspirin are some examples of goods made from petroleum derivatives. Higher fuel prices also mean higher input costs for farmers and manufacturers, resulting in higher prices at the till,” says Heilbron.

With the rand showing weakness in the face of a rampant US dollar and global inflation on the rise, consumers are adjusting their behaviour to a new reality. According to the Bureau of Market Research, consumers are travelling less, opting for click and deliver, and buying cheaper and more fuel efficient vehicles.

Some tactics and strategies retailers can adopt to remain profitable in this environment include:

Streamline the product range: Tight inventory management is key during a time of volatile pricing. Some retailers can benefit from streamlining product assortment to reduce costs and simplify customer choices.

Retailers can make fuel price movements work in their favour: Smart retailers can make fluctuating prices work in their favour. For the estimated diesel price increase in November 2022, retailers can stock-up at current diesel price, to resell at the increased price in order to boost profits. A funding loan of R700,000 to pay for a diesel consignment over a 90-day repayment period ahead of the estimated diesel price hike in November, to be settled in the first 30 days, can equate to a profit of around R26,000 after finance charges.

Consider low-end alternatives: White-label and discount brands are doing well, given that many customers are cutting costs. The presence of a lower-priced alternative gives the price-conscious shopper options and creates a perception of value for those able to spend more.

Follow the data: Tools such as inventory management systems and data analytics can help merchants refine pricing strategies. They can use predictive analytics to forecast which products will be in demand by season. Or they can dig into historical data to gauge which promotions and specials help to drive footfall and bigger basket sizes.

Go omnichannel: Today’s customers follow a complex purchase journey. They may research online and buy in store. Or they could go to a shop to see and touch a product, before ordering from the cheapest shop on the Internet. Retailers should be present where the customer is, offering choices to buy online-pickup instore, curb-side pickup and in-store shopping.

Destination shopping: Retailers should offer value-adds like dining, shoppertainment and expert demos to entice customers to spend more time and money with them. Retailers in sectors like homeware and DIY can attract traffic and increase sales by showing customers their products in action. Even adding a bistro or an interactive product display can attract customers and get them to linger.

Heilbron says, “The key to accessing these opportunities is affordable and hassle-free funding that lets your retail business bulk buy stock at discounted rates, invest in technology or revamp your store. With Capital Connect, retailers apply for business funding from the Connected App, choose their desired loan amount of up to R5 million, select their repayment period - and the funds will be in their bank account within 24 hours or less.”