3 factors impacting consumptions and your distribution business

Today, I would like to share my thoughts on 3 key factors that are impacting consumer sentiment. If you want to distribute goods and get enough revenue for your business, you need to understand more about your consumers.

You need to understand what makes them open up their wallet to buy goods in the market, and what hinders them to do so. By reading today's post, I hope you would get some understanding on what would impact your sales revenue in the future.?

Without further ado, let's get started.?

1. Layoff

Layoff is one obvious reason why people reduce their spending and increase their savings. People would lose their source of income if they lose their jobs, and it would take some time to get another job to restore the stream of income.?

If getting a new job takes a long time, it would mean that the entire family would have to reduce their spending for a long time. They would reduce their spending on non-essential items and services that are not relevant to their survival.

If you distribute non-essential items, such a trend may decrease your revenue and force you to reduce your costs. Cost-cutting may involve buying less for office supply, but the ultimate cost cutting may come from reducing the headcount.

Since the business becomes unsustainable as the consumers can't spend, it would lead to cost-savings measures. It explains why retail companies like Amazon or Wayfair are now starting to reduce their headcounts.?

If you see a layoff trend happening in your economy, you need to brace for the impact. Your sales figures may become ugly if you are distributing non-essential goods like cosmetics.?

So, if there is a layoff, it would reduce the consumption. A reduced consumption may impact your sales and may force you to cut the number of personnel.?

Your action will generate more layoffs and another cycle of reduced consumption. If other companies follow the suit, it will make the situation worse.?

2. Inflation?

Inflation is another key factor that would reduce consumption in the economy. It makes the price of goods more expensive than before thereby reducing the appetite of consumers to buy from the market.?

For some items inflation may have an opposite effect to consumption. If people think that an essential product for them would increase its cost in the future, they would try to buy those goods as soon as it is available.?

In such a way, these consumers would get some advantage of buying what they want at a cheaper price in comparison to what they would get in the future. Such a trend may happen in a limited number of goods such as food or other essentials.?

For the rest of product categories, inflation may reduce the consumers' appetite to buy and reduce the top line figures of companies. One example would be the clothing industry where people will buy less clothes due to their concern on the price of goods.

Since people would like to reserve some more money to buy essential items such as food, they would reduce spending on other things. They would do these things later since they already have those things at home.

So, if you are distributing goods in non-essential items, you should prepare to restructure your business to stay afloat. You may need to change your product or to reduce the expenses by reducing your headcount.?

3. Interest rate?

Interest rate is a twin child of inflation since the central banks would use their rate hikes to control the inflation. If the interest rate becomes higher, it leads to increases in the interest rate that banks charge their borrowers for their debt.?

If you are a borrower from the bank, you need to pay interest every month. What you pay to the bank is usually a combination of the bank's profit plus bank's expenses to get money in your hands.?

The banks would borrow money from the central bank to issue money to their borrowers. Since the central bank charges more to the bank by raising interest rates, your bank would also need to raise its rates to cover its increased costs.

So, if you hear from the news that the central bank increases its rate, it will mean you as a borrower would need to pay more for your interest.?

As the central bank increases its rate at a rapid speed, the interest you need to pay would also start to increase at a similar pace. It will mean that you need to reduce your spending even on essential items to serve your debt payment.?

Otherwise, you would become bankrupt, and you would lose all your credit in the society or even lose your job. Such a situation would further drive you to reduce your spending thereby you can stay afloat.?

So, the current interest rate hikes are currently impacting our finances and reducing our spending. If you are running a distribution business, it can impact your revenue.

4. Wrap-up

I hope you would now have some idea on what factors would impact the consumer sentiment in the economy. What I described is somewhat universal since it happens in most of the advanced economies in America, Europe and Asia.?

If you are aware of what is currently happening, you can take necessary actions in advance to save your business from collapse. You would need to reduce your headcount and unnecessary investments, but your chance for survival would become higher.?

If you liked today's article, please put your thumb up and share the article with others who may also enjoy it. Thank you, and I will see you in my next article.?