Inflation continues to impact both retailers and shoppers. Merchants like Cyberweld find that the cost of its bestselling machinery continues to rise as fewer shoppers buy higher-ticket items and instead opt for less expensive merchandise.
“The raw [metal] materials needed to weld have gone up. One reason we’re not selling as many bigger ticket machinery items is because people are trying to fix what they have because they have to spend more on consumables,” says Robert Goodliffe, president and CEO.
Customers are buying lower-cost items, Goodliffe says. “They’re buying safety gear and some replacement parts but overall, fewer machines,” he says.
During the pandemic in 2020, Cyberweld customers purchased more consumables to keep their existing equipment running instead of buying expensive products like welding machines, Goodliffe says. Consumables include flux (welding wire) and filler metals (including aluminum, stainless steel, copper and silver). To offset this shift, Cyberweld found a new batch of shoppers in 2020 for vented masks and other respiratory safety gear to guard against COVID-19. The retailer pivoted its selling strategy to sell personal protective equipment (PPE) and, as a result, received an influx of industrial customers in 2020.
In 2021, the demand for PPE subsided and Cyberweld found selling welding equipment and consumables presented new challenges. In 2021, Cyberweld (No. 1048 in the Next 1000) ranked No. 714 in the Top 1000 after a banner 2020 year. 2021 and 2022 have proved to be more challenging.
Inflation affects equipment prices
While supply shortages weren’t problematic for Cyberweld in 2021, inflation was and continues to impact the retailer in 2022. The merchant’s top-selling piece of equipment is a good example of this — the price for this one product jumped by 28% from 2020 to 2022, Goodliffe says.
The Millermatic 211 is historically the merchant’s bestselling welder machine. In July 2020, Cyberweld paid a distributor $1,219 for each welder. Cyberweld than sold the machine to its customers for the retail price of $1,717. By July 2022, that same welder cost Cyberweld $1,689, which the merchant sold to customers for a retail price of $2,380. Overall, this piece of equipment increased its price five times between July 2021 and 2022 and 18 times since COVID-19 began in March 2020, Goodliffe says.
That cost increase has impacted demand, Goodliffe says. In 2021, Cyberweld sold 866 units, compared with 1,262 units in 2020. Through June 2022, Cyberweld had sold 245 units, which is less than the norm, he says.
Shoppers buy fewer welding machines
The types of products shoppers buy also changed in 2021. Historically, Goodliffe says the retailer’s average order value (AOV) was about $440. But in 2022, that has decreased about 25%. Customer buying behavior has shifted, and that’s reflected in what Cyberweld sells, Goodliffe says.
Web sales decreased around 10% in 2021 compared with 2020, Goodliffe says.
“2022 is on par with 2021,” he says. “And inflation makes the impact worse.”
This is an excerpt from the 2022 Next 1000 Report. The report can be downloaded now as a PDF for $499. Digital Commerce 360 Gold and Platinum Members receive a complimentary copy of this report as a part of their membership.
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