RETAILERS RISE TO THE CHALLENGE OF RISING PRICES

Retail Marketing|Thought Leadership|Trends|

After surviving innovative disruption and pandemic paralysis, the retail sector faces down its next challenger — inflation.

The personal finance advice we’ve all heard about cutting out our daily restaurant cup of joe to save money is about as fresh as the 4 o’clock coffee pot dregs in the office kitchen. In this year of inflation and rising interest rates though many consumers have been jolted wide awake to greater cost consciousness, if not outright concern.

The Consumer Confidence Index fell in June to its lowest level since February 2021. Also, the Expectations Index, which is predicated on consumers’ short-term outlook for income, business and labor market conditions, fell sharply to its lowest level since March 2013. 

“Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices,” said Lynn Franco, senior director of economic indicators at The Conference Board, which publishes the monthly Consumer Confidence Index. “Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year’s end.”

There was some good news though with double-digit growth across nearly all retail sectors in May, according to Mastercard SpendingPulse™, which measures in-store and online retail sales across all forms of payment (not adjusted for inflation). The report had total U.S. non-automotive retail sales increasing 10.5 percent year-over-year in May and 21.4 percent compared to pre-pandemic May 2019. Furthermore, U.S. (non-automotive) retail sales are expected to grow 7.5 percent compared to 2021 with department stores expected to be a refreshing highlight in that sales trend.

“While Mastercard SpendingPulse anticipates growth across sectors, retailers will need to find innovative ways to entice shoppers as discretionary spending potentially stretches thin as a result of increasing prices,” said Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated.

How will retailers navigate this period of inflation? It’s a good thing that they have recently had to exercise their innovation and customer retention muscles during the pandemic. This new economic stage causing consumers to pinch pennies and make other budgetary cuts will be a test for sure, but the retail sector is quite accustomed to change and challenges.

McKinsey & Company recommended six actions that retailers could take to navigate inflation with the goal of more efficient operations, greater customer retention and, of course, profit growth. They include enhanced supply chain visibility and diversification, recalibration of product category strategies for better balance with rapidly shifting consumer preferences, granular pricing and promotion (rather than the more visible and potentially triggering broad price increases) and rethinking store operations to boost productivity.

“What we talk about so much, from innovating through a major pivot to staying on top of changing consumer preferences and optimizing customer experience, is not only about maximizing efficiency and opportunity, but also being able to answer the bell in demanding times such as this inflationary period,” said Marcia Homer, infinitee’s Director of Brand Management. “Retail life comes at you fast, as seen by the last two-plus years of challenges. It’s critical to have a plan and a brand builder and marketing partner that are responsive and can meet the moment.”

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