Retailers find inflation is often about location, location, location

Discussion
Photo: RetailWire
Dec 02, 2022

Inflation is a top concern for both businesses and consumers currently, and rightfully so as the U.S. trend continues to remain high.

The most recent Consumer Price Index national average for October was 7.7 percent, down from the high of 9.1 percent in June. Meanwhile, the cost-of-living adjustment for 2023 will be 8.7 percent, impacting benefits for over 70 million Americans, but falling short of current inflation.

Although container rates may be stabilizing, retailers are coping with a variety of other factors such as staff shortages, inventory glut and inventory that was purchased at high rates. Retail prices are therefore being driven up exponentially.

Meanwhile, several companies are being called out for corporate greed for opportunistically raising prices under the guise of inflation, resulting in record high margins. Some have justified their price actions as an effort to recoup losses during the pandemic, but consumer trust is low. This is further exacerbated by consumer awareness of shrinkflation as reported by RetailWire and others.

Considering all of the factors impacting inflation, the pressure is not evenly distributed across the country, yet most pricing strategies take a blanket chainwide approach. In a recent analysis by WalletHub using data provided by the U.S. Bureau of Labor Statistics, the team calculated localized inflation rates.

Cost of living has long been a key metric, but inflation by location is an interesting concept. Cities such as Phoenix, Atlanta, Miami, Tampa and Baltimore saw the highest impact. These metro cities likely experienced shifts in population during the pandemic and trended towards work from home structures. Curious about your own personal inflation rate? Several resources are available online, such as this tool from the New York Times.

The always unique state of California, who’s metro area San Francisco ranked low on the local inflation rate, has taken steps to further offset inflationary pressure for its residents. California will be providing “Middle Class Tax Refund” payments in the form of debit cards. Retailers can likely expect a surge in purchases following their release, much like in the case of stimulus checks.

Considering the traditional factors and variables, retailers are taking action using a variety of tactics, including inventory cuts, order cancellations, layoffs and capital expenditure reductions, price freezes and rollback pricing on essential products.

DISCUSSION QUESTIONS: What do you see as the most effective tactics for retailers trying to hold the line on inflation for their customers? Will consumers reward retailers that are perceived to be fighting inflation with their continued patronage once prices moderate?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Consumers are very conscious of retailers and their pricing at this time and will respect and be loyal to retailers who offer good value."
"Price, price, and price are the best tools that retailers have, followed by location."
"The most effective tactic I’ve seen has to do with price — simply holding the line on price increases of fast moving, essential items."

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7 Comments on "Retailers find inflation is often about location, location, location"


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Mark Ryski
BrainTrust

The most effective tactic I’ve seen has to do with price — simply holding the line on price increases of fast moving, essential items. Some retailers are holding prices on their private label brands that they have higher margin on. While holding prices may not seem like a big win for consumers, the fact that the retailer does not raise the price is in effect a price decrease compared to other products that are seeing price increases. And while this effort is helpful, I’m not sure this will build a whole lot of loyalty for inflation-battered consumers.

Jeff Sward
BrainTrust

There might be some geographic variables in addition to product-specific supply chain variables that impact the level of inflation, but in the end it boils down to a retailer’s operational efficiency and good old-fashioned competition that gives any given retailer an edge. As a consumer, I will absolutely reward retailers that I perceive to be working hard at minimizing price increases. And I will absolutely shun any perceived attempts at price gouging. I have switched brands and retailers out of political considerations, and will do the same when it comes to price gouging.

Gene Detroyer
BrainTrust

The number one action of price-based retailers is to convince shoppers they are fighting inflation. But the reality is retailers love inflation and what it does to the bottom line.

Andrew Blatherwick
BrainTrust

A number of retailers have stock from previous years that they are clearing over the holiday period. While they have had to fund the inventory for an extended period and the cost of storage they have also benefited from inflation as the price for that inventory is now considerably higher than last year. Passing this benefit on to consumers is a great way to help your loyal customers and keep their patronage. Consumers are very conscious of retailers and their pricing at this time and will respect and be loyal to retailers who offer good value. Having good quality own label products that are generally cheaper than major brands is also valuable to customers and certainly builds brand loyalty. The key here is “good quality.” If you try to sell cheap items that do not represent value that will backfire.

Shep Hyken
BrainTrust

Inflation hurts. Prices are going to go up, which frustrates customers. Retailers must have their customers’ trust. Start with price transparency. Then focus on the relationship by training employees to be empathetic and have more positive interactions “on the floor.” Even a pleasant greeting as you walk by a customer is a way to connect.

Kai Clarke
BrainTrust

Price, price, and price are the best tools that retailers have, followed by location. The QSR community thrives on location leading their retail sales, but the majority of retailers (and all online retail sales) depend on product price differentiation to control their gross sales and manage (or not manage) inflationary pressures using this.

Craig Sundstrom
Guest

Don’t raise your prices (as much): few things could be simpler…or more effective!

I’m always bemused during these pricing threads: the Econ degree on the ring that graces the finger I type with tells me that “the Market” sets prices, and individuals — e.g. sellers — have little say over what they charge; the frequent discussions on these pages of “maintaining margin” tell me those sellers are in a constant battle to prove the theory wrong.

wpDiscuz
Braintrust
"Consumers are very conscious of retailers and their pricing at this time and will respect and be loyal to retailers who offer good value."
"Price, price, and price are the best tools that retailers have, followed by location."
"The most effective tactic I’ve seen has to do with price — simply holding the line on price increases of fast moving, essential items."

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