Business is all about the market and market as we know is not stable. It’s not possible to predict market trends. The ups and downs in the market affect businesses both positively and negatively.
- Price and demand are interrelated and inter-dependent. Both go hand in hand. Changes in one ultimately would lead to change in others.
- Demand is inversely proportional to price. As the price of any commodity increases the demand tends to decline for that product and vice-versa. For example, the demand for onion declined when its price shot up.
- Essential commodities:-Some commodities are essential for daily life like rice, flour, pulses etc. people would buy these essential items even if the prices go high. The demand for these commodities is almost unaffected with the changes in its prices.
- Related commodities:-There are commodities whose alternates are available. For example, people consume tea and coffee alternatively unless they are very rigid about their choices.
- Now suppose if the prices of coffee go high people would start shifting towards tea and demand for coffee would decrease automatically. Another example would be of petrol and diesel if the price of petrol shoots up then the demand for diesel car increase.
- Expectations of change in price in the future: if the price of some particular commodity is expected to rise higher in the future then people start to buy and keep stock.
- Seasons:- demand for season-specific commodities increases in that particular season. For example sweaters, woollen clothes in the winter season, ice-cream in summer seasons etc. due to this increase in demand prices increase.
- Festive season:- demand of certain commodities increases during or before the certain festival, for example, the demand of flowers and fruits during Navratri, the demand of furniture, electronic appliances, gold/ silver during Diwali (Dhanteras)/ Akshaya Tritiya.
- You need to analyse these trends for your business benefits, for example, try keeping more essential goods in your stock rather than luxurious goods so that even if there is a change in demand and price you are less affected.
- Keep updating your stock according to customers demand which changes from time to time. for example, if you run a textile business you can bring new stocks before the festival as customers buy more new clothes for the festival. If you own a jewellery shop bring in new designed, trending jewellery before Dhanateras or Akshay Tritiya to increase your sale.
- Never keep stock of such products whose prices are fluctuating all the time as it would disturb your business and you would not be able to attain stability which is very much required for a small business. For example, the prices of vegetables and agricultural products are very much volatile you might earn a huge profit at some time and might face a huge loss. To be on the safer side try to get some vendor for your products at a fixed price or follow MSP by the government.
- Bank rates also affect the market at large. Bank rates are changed from time to time to control cash flow in the economy. If the bank starts giving more interest on FDs, RDs then people start hoarding. That is to get more interest they start saving and investment decreases. This leads to a decrease in demand and a decrease in cash flow as well.
- Yet another situation in which the central bank increases the rate at which other banks borrow from the central bank. The central bank also increases the CRR (cash reserve ratio) and SLR (statutory liquidity ratio). Due to the increase in CRR and SLR bank lowers the interest rates which they offer to the people this makes people disinterested in saving and they stop hoarding. This ultimately leads to more investments and increases the cash flow in the market.
- As a business owner, you need to be more cautious about the fluctuations in the cash flow. Whenever the cash flow increases, it leads to more investments which is beneficial for you as it would increase your sales and in the other situation where cash flow decreases you might face a decrease in sales.
- Rates of Gold, silver, diamond etc. affects the market in many ways. As we know Indians are fond of gold and silver jewellery and to be specific it’s the gold jewellery which attracts more people.
- There has always been a trend that whenever the rate of these precious metals decreases or increases its demand changes accordingly.
- The decrease in price leads to an increase in demand and vice-versa. Due to these, investments in other sectors decreases.
- As the income of people increases their standard of living improves.
- For example, when people start earning more they start taking more protein-rich food, they buy luxury products.
- They switch to better alternatives like a car, AC, etc. but there would be no changes in the essential commodity requirements. It might be possible that they change their food habits like taking brown bread instead of white bread, taking good nutritious food like pulses, meat products, dairy products, etc. If your business falls under these categories then you are surely going to earn huge profit.
- But imagine what would happen in a recession where people run out of money and start cutting their expenses. In such situations, you might face loss.
- You have to be prepared for facing such a situation as well.
- Consumer behaviour changes a lot. Consumers are influenced by so many things and change their preferences from time to time. For example, it changes according to seasons, festivals, tastes, preferences, etc.
- Advertisements play a huge role in changing consumer behaviour. For example, if some personality is advertising for a particular product then followers get influenced and buy the product just because they love that person.
- People relate class or status with some products, like having an iPhone shows a different class. Another example is wearing more gold jewellery etc.
- Consumer behaviour needs to be analysed well to increase your sales by keeping stock of in-demand products.
Although it is not possible to have a perfect plan for your business as the market itself is not stable and we do not have a perfect economy. You can still do the following to save your business from adverse effects of market volatility:
- Whenever you see that the products you have in your stock are not attracting much demand and also its price is decreasing then sell off that product as soon as possible. You can do this by organising sales.
- Bring new stock according to seasonal demands. For example, bring trending and new clothes during festivals.
- Offer some discounts to attract consumers when you see that your products are not in demand or is relatively less than other products. Make sure the discount you provide doesn’t lower your profit margin.
- Do branding and advertise well so that you don’t lose your consumers. Provide them with your best service and give them a good experience so that they would be compelled to visit your store next time.
You can take the help of Billing Software like Vyapar which helps you manage your business effectively. Vyapar can help you to manage inventory, make bills, generate GST ready reports and more. While market demand fluctuates, you can make business decisions by using this app.
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