Comment: What will global inflation and the war in Ukraine do to our beloved value stores?

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Third, companies could focus on quality, because reputational damage resulting from substandard products is more expensive to fix than a temporary drop in profits.

Finally, they could also appeal to the growing segment of customers concerned about the environment, social and governance (ESG). For example, they may offer products that are sustainably sourced or sourced from small artisans and family businesses in the community, or have dedicated shelf space for businesses run by or employing disadvantaged people.

HOW WILL CUSTOMERS RESPOND?

Could this fundamentally change the products and prices we associate with discount stores? It’s possible, but it doesn’t have to be drastic. Diversifying even a portion of their product offering and manufacturing could already help cushion some inflationary shocks.

International chains like Daiso seem to be employing a strategy of global expansion for the greatest economies of scale and to absorb shocks in more markets. It continued to open new stores in the United States during the pandemic. But that might not be feasible for all value stores.

Working with the community to build trust, rather than having a short-term profit motive, could help value stores survive. Building trust would reduce the cost of acquiring customers (like advertising), create brand loyalty, reduce the impact of price-sensitive consumers, and strategically focus on the long-term stable economy to help build this bridge over troubled waters in the short term.

Will customers respond? It remains to be seen how Daiso customers will change their shopping habits. but other value stores may be watching to decide whether shifting gears or biting the bullet is the way to go.

Dr. Aurobindo Ghosh is Assistant Professor of Financial Education and Senior Researcher DBS-SKBI Singapore Index of Inflation Expectations Project, Lee Kong Chian School of Business, Singapore Management University.

Dr. Taimur Baig is Chief Economist and Managing Director of DBS Bank.

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