2022 Business Challenges
The past couple of years has seen a series of global events have a huge impact on businesses across the world. According to a series of online reports, the 5 main challenges that businesses predict for this coming year are…
- Climate change
- Production and supply chain issues
- Rising costs
- Brexit
- Coronavirus restrictions
Although we are fortunate not to have experienced too much disruption due to the Coronavirus pandemic or Brexit, we could never have planned for the increasing costs and supply chain changes that have occurred over the past few months. This has definitely had the biggest impact on our business and has affected everything product related - from range planning and forecasting, to pricing and shipping.
As we embark upon a new year, we take a closer look at what these changes mean for our business, and yours - and how we plan to navigate through the year ahead.
Climate change
The global climate crisis requires everyone to take action and companies of all sizes across every industry have a role to play. The COP 26 summit of 2021 saw over 1000 cities and 6500 businesses pledge to decarbonise their operations by 50% by 2030 and to be 0 by 2050.
A recent survey by Deloitte found that 97% of business executives felt that their company had been negatively impacted by climate change in some way. Changing weather patterns affecting production and shipping, scarcity of natural resources such as water and crops, and rising costs of raw materials and energy were listed as some of the ways in which business have been affected. This may have encouraged some companies to realise that the climate crisis will pose a threat to all future business - as well as the Earth and humanity!
Whatever motivates the desire for change, it must lead to action. As global awareness is heightened, greenwashing just won't wash anymore. Customers are increasingly looking for visible action sooner rather than later, and they certainly don’t want vague promises that things will improve in years to come. If businesses want to be relevant in the future, they need to evaluate how they can balance profitability with their responsibility to protect the environment.
Governments, businesses and consumers are demanding better environmental practises in every area; the operation of the company itself, production, supply chain, packaging, shipping and delivery. We believe that no amount of action is too small, and that if any business wants to have a successful future, it ultimately depends upon the future of the planet.
This is a topic that we feel very passionately about here at Inca, and we are continually evaluating the way we work and our plans for the future. As part of our plan to lessen our impact on the environment we have taken our first small steps to launch a more sustainable range of recycled polyester hair elastics which are manufactured in the UK. Using recycled polyester reduces the waste sent to landfill, and as they are produced locally to us, the carbon emissions and shipping miles are drastically reduced. This is an area we hope to grow, with the aim of offering our customers more sustainable product options. You can read more about our journey here.
Production and supply chain issues
You may have read about the shortage of power in China where supplies are being limited for a number of reasons - reduced coal production due to extreme weather conditions, resurgent demand as restrictions are eased during the pandemic and environmental targets. At the end of 2021, the use of electricity had been limited in 20 out of 31 provinces, which is greatly impacting the manufacturing process. Rationing of electricity supplies means that many factories can only operate on a reduced number of days - up to 50% less in some areas, so the factories simply can’t produce the same amount of goods at the same speed
We have been working very closely with our factories in China to ensure that we can maintain the best possible stock levels in the current situation. We are experiencing some delays receiving new lines, but so far we have not had any major disruption to our stock levels. We have a large warehouse in the UK where we can store ample stock of our bestselling lines, and as we have long standing relationships with our suppliers we are able to work together to get a supply of products that is achievable for the factories.
Rising costs
Global prices on almost all goods and services are rising. We have seen the price of raw materials, labour and shipping all increase over the past 12 months. Where possible we will always maintain our prices and are very transparent when it comes to the cost of our goods, but we hope that our customers can understand that occasionally there are times when our prices must increase in order to make the lines viable for us. We are not making price increases across the board, only on the lines where the cost of goods has gone up. Our profit margins have not changed and we want to guarantee customers that we are being as fair as always with our pricing structures.
Although price increases are often viewed in a negative way, we actually view the price increases from China in a positive light to some degree. All of our products are made by hand which takes great time and skill. The price of these skills has realistically been too cheap for too many years, and we believe that the value of skilled labour should be passed on through the chain with sensible cost and retail prices. Driving down prices is not sustainable for any business in the long term.
Brexit restrictions
As we planned earlier than some, we have successfully been able to continue delivering our products to the EU after Brexit last year. You can find out more information and the associated costs here.
Covid-19 restrictions
Our office has been set up in a covid secure manner which means that we are able to continue to operate should any further lockdowns occur. As we are dispatching orders we are unable to work from home, so you can continue to receive the same standard of service from us should any further restrictions be implemented.
One of the ways in which the pandemic has affected us is that we are not able to go to China on our usual buying trips. We would typically go at least twice a year to work on new lines. As travel to China has been restricted we are having to rely on images and videos as opposed to seeing samples or doing product development in real life. When you factor in the time difference between the UK and Far East, it means that it can take longer to get products into work and receive the correct samples. We can assure you that we are working hard to make everything happen as quickly as possible, and we look forward to returning to China as soon as this is possible.
There certainly seem to be some challenges in the year ahead, but we will continue to bring you the best products for the best possible prices so that our businesses can support each other for 2022 and beyond. If you would like to discuss any of these issues with us in more detail, please do not hesitate to get in touch.