How Bariloche businesses adapt to survive in times of high inflation

2023-11-12 16:28:00

The inflation rates recorded by the economy in the first part of the year had already generated a microclimate that put them on the defensive, but the rise of the index above double monthly digits starting in August forced businesses to deepen strategies to stay afloat.

The relationship with suppliers is the main concern, although – depending on the sector – they must also dedicate special attention to it. to the maintenance of stocks, the replacement of merchandise, the updating of final prices and the commercial link with the cards.

Adaptation is not easy and many small and medium-sized merchants admit that managing in this context is a cause of “permanent shocks” and a stress that no one knows if it will find relief or will become even more acute after the ballot on Sunday the 19th.

Jorge Elvira, owner of an appliance chain, said that the situation is critical and has worsened in the last three months, to the point that “Any mistake you make is paid dearly.”. He admitted that in some cases it is preferable to retain items and not sell, due to the difficulties in replenishment.

“Everything is difficult in this situation. The least we do is work to produce, we work to survive,” said Elvira. In your specific case, the concern is not so much about the progress of inflation but about “the lack of merchandise” and for exchange rate parity.

Everything that is not essential registers a drop in sales. Photo: Marcelo Martínez

He explained that home equipment and electronics, although produced in the country, have a high dependence on imported inputs, which enter in dribs and drabs. That is why there is a general shortage of products, ranging from televisions, tablets and computers to kitchens and washing machines.

The outlook is different for those who sell basic basket items. The owner of Todo supermarkets, Roberto Gilio, said that with the current levels of inflation the main objective that a company like his has is “lower the number of accounts receivable”. At the same time, their suppliers also shorten deadlines and require cash payments, or with minimal waits.

Everything that is not essential registers a drop in sales. Photo: Marcelo Martínez

In a scenario like this, 48 ​​hours or so can mean millions of pesos. Payment applications and credit cards have payment terms to businesses that historically are around 30 days and are a factor in imbalance in retail sales. Although Gilio acknowledged that they cannot do without these instruments because fewer and fewer clients handle cash and everything is digitalized.

“I have no other option than to seek a review of those deadlines, and our supplier is in the same situation. It is very different to close a payment in 30 days than in 20, or lower it from 20 to 15,” he explained.

The items made in Argentina sold by appliance houses are highly dependent on imported inputs. Photo: Marcelo

A similar race is being played with price markups. According to the supermarket, the risk is being out of date with the lists and “losing working capital.” Gilio said that for now there are no major shortages, but with groceries in general “the supply is very fair”. He observed that “it is not the same as what happens with the corralones, where, for example, iron has not been available for a long time,” due to the uncertainty with the dollar and the skyrocketing inflation.

“You lose track of where you stand.”

The president of the Federation of Companies and Entities of Bariloche (Feeba), Leonardo Marcasciano, said that the current moment is “very anxious” and today managing an SME “is a constant juggle, you have to do magic every day.”

He said that the sector he represents – small and medium-sized local businesses, in many cases family businesses – are not price makers but rather “list takers”, so the rule is constant redialing.

He acknowledged, however, that this dynamic has its nuances, because in a context like this (as has already happened in other crises) the usual thing is not to transfer everything to prices, in an effort to avoid a pronounced drop in sales. “What happens is that in the volley the profit margins are reduced, with the hope of recovering them when everything stabilizes”Marcasciano said. He pointed out that that horizon today appears diffuse and “everything is very glassy, ​​the context makes one lose track of where one stands.”

Photo: Marcelo Martinez / Patagonia.

In La Candela, a traditional house of regional items located on Miter Street, they also experience the impositions of rampant inflation. “Prices are updated every day and you have to be attentive, because several of the suppliers operate with dollar value,” said Jazmín Campos, one of the employees. In that location, the tourist clientele is very important (almost 70% of the total), so it is also necessary to closely follow the exchange rate to inform day by day how much payments are taken in dollars, euros or Chilean pesos.

Campos said that sales suffered only in part, because “For tourists it is cheap and if they like something they buy it, but the resident sees the prices and wants to die.”.

On the same Miter sidewalk, in a sports and leisure clothing store, the manager Marina assured that for them the local customer is very important and that is why they try to “keep the prices accessible.” These days the attraction is the post-season sales and the possibility, still open, of buying, for example, a jacket in 3 or 6 installments. Although the windows in general show that with some exceptions, interest-free financing plans, with the inflationary peak, went down in history.

Marina said that credit cards delay payments to businesses and charge a commission that does not go below 2.5%, but it is essential to work with this modality because in many cases “it defines the sale.”

Thorough rethinking

Marcasciano recognized that the shock to the economy is widespread and that in the game of costs and profitability the worker usually loses. He explained that the small businessman – if he has to pay increasingly higher wholesale prices, as well as logistics costs, freight and taxes – “sometimes restricts other items that affect the price, for example labor”.

He clarified that in many areas inflation is not what dictates prices but rather the value of the dollar and import restrictions. “When it is impossible to access the official dollar, as is happening now, the importer has to deal with the MEP dollar. There are price lists with everything up 30%, and it’s really scary,” Marcasciano described.

The items made in Argentina sold by appliance houses are highly dependent on imported inputs. Photo: Marcelo Martínez

He assured that although the latest report from the national chamber Came indicated that sales in SMEs in October grew 4.7% compared to September, the general trend is downward, and the interannual comparisons “they continue to fall, and they do not stop”.

According to the Feeba manager, living with these price shocks “is an unbearable stress, something that overwhelms you” and the merchant must be “with the lists in hand all the time” to not be out of date and avoid surprises.

Dance of prices and consumer habits

The permanent check that economic vicissitudes impose on small businesses is transferred to customers, who battle daily in the search for offers and promotions, which are increasingly scarce.

Larger establishments have a different background and can negotiate better with suppliers and credit card companies. Supermarketer Roberto Gilio said that extended payment terms in times of inflation are a real problem. He assured that with some cards he could “lower the accreditation time a little, which historically was 30 days. Some agreed to settle after 21 days.

Gilio said that they review the prices on the shelf “every week,” unless expressly communicated by the supplier about any anticipated changes. Asked about consumer behavior, he pointed out that some changes come from the desire to buy quantity when they detect a convenient price, especially with basic products such as oil, flour and sugar. “It is the only refuge that the consumer finds, especially at the beginning of the month,” he said. Any extra weight that people have in their pockets goes towards consumption. If they grant a bonus of 5,000 pesos, that alone is noticeable.”

Regarding customer priorities, Gilio said that in a crisis like the current one, “everything that can be replaced or that is not essential” records a drop in sales, for example fabric softeners, fine wines or flavored waters. But he also admitted that Bariloche has its particularities, due to the tourist public. He said that “Brazilians, for example, buy a lot of expensive wines and other gourmet products”, which the local client eliminated from his little bag.

Everything that is not essential registers a drop in sales. Photo: Marcelo Martínez

He also maintained that in the current situation his company and others prefer to manage tighter stocks, among other reasons because quantity discounts are no longer abundant. He said that today “it is much more difficult to negotiate with the supplier.”

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