fbpx
HomeNEWSRetailers are feeling inflation and are turning towards increased pricing or online shopping

Retailers are feeling inflation and are turning towards increased pricing or online shopping

Retail inflation pricing

For the first time in about a decade, people are feeling the pinch of inflation.

In New Zealand, inflation has reached a record high for the first time since 1990’s. The rate currently sits at 5.9 percent.

But what does this mean for retailers?

In a recent survey run by Retail NZ, 90 percent of retailers are expecting to raise their prices by 7.5 percent over the next three months. “The average price increase expectation is 7.5 percent, suggesting that pricing will be a significant issue as the year progresses,” says Retail NZ CEO Greg Harford.

The survey shows that costs are increasing at a rapid rate. Already, 58 percent of retailers have increased prices, an increase of 1 percent from the last quarter recorded.

Inflation is spreading quickly, with issues such as Covid-19 and the war between Ukraine and Russia creating shocks in the business world. Mark Knoff-Thomas, CEO of the Newmarket Business Association says the impact of inflation was first felt for retailers at the beginning of the pandemic with supply chain issues and cost of freight rising.

Three years into the pandemic, there remains a domestic and global supply chain issue associated with Covid-19, causing pressure on retailers. With the war between Ukraine and Russia added on, the effect of inflation is being felt even more.

The Retail NZ survey suggests that many retailers are unable to cope with the pressure and will instead result in price increases. The survey also mentions the low levels of consumer confidence and retailer confidence, with 35 percent of retailers saying they are not confident of surviving the next 12 months.

Particular Audience CEO James Taylor
James Taylor.

“Retailers and producers are feeling their margins crushed, already feeling supply chain shocks,” says James Taylor, founder and CEO of Particular Audience, a system that supports retailers in the e-commerce industry.

He picks up that for retailers one of their major concerns regarding inflation is whether they must increase their stock prices which could lead to consumers realising the price jump and ultimately not buying anything.

Read more: Managing the impact of Omicron on your retail business

Knoff-Thomas adds that for retailers they have absorbed “lots of pressure” on costs and businesses. He says that they are undergoing “a raft of issues” and he “fully understands why” retailers are increasing prices.

For consumers, they are “starting to feel it”. Taylor says the best ways for retailers to combat inflation is “margin preservation”. Essentially, Taylor suggests for retailers to head to an area where inflation is “not crunching down”.

“Retailers need to switch gear into smarter conversion retail,” he adds.

During the Covid-19 alert level lockdowns, Knoff-Thomas says that many retailers took the opportunity to diversify how they operated by “offering as much choices as possible” and attempted to “understand their audiences” better.

“At the end of the day, they reaped the rewards,” he says, adding that a few retailers have done exceptionally well in expanding their business to fit the omnichannel retail strategy in the face of inflation.

That is where e-commerce falls, the future of retail is online shopping. It is vast, with endless amounts of data online that can help build profit.

Taylor adds that with e-commerce, inventory allocation is easier, and data helps reallocate stock, reducing prices for retailers. Fast fashion website, Shein is the perfect example of a retailer that has nailed e-commerce. In the year 2021, they have reached a revenue of over $10 billion despite the pandemic.

For retailers with brick-and-mortar stores and have no intention of going online, Taylor suggests that they look deeper into who their customers are and what is “economically going on with them”. Inflation will ultimately impact consumers behaviour when they shop as the gap of their disposable income becomes smaller.

Knoff-Thomas says that with restrictions lifting, the industry can expect more foot traffic, however he says for retailers they are “not out of the woods yet”.

“You have to keep coming up with ways of being agile,” he adds.

Rate This Article:
Author

Bernadette is a content writer across SCG Business titles, The Register and Idealog. To get in touch with her, email bernadette.basagre@scg.net.nz