A survey of top retail executives finds 59 percent planning to pass on the costs of supply chain disruptions to consumers. Thirty-six percent were planning to absorb the hit and keep prices consistent.
The survey of 51 senior-level executives fielded in October 2021 by First Insight in partnership with the Baker Retailing Center at The Wharton School found 68 percent expecting a margin hit of less than a 10 percent, but 27 percent saw a reduction of 10 to 20 percent, and five percent, more than 30 percent.
Overall, 65 percent of respondents indicated they were changing their pricing in response to inflation.
Asked how they are deciding where and how much to increase pricing, the top responses were:
- Cost-based pricing/passing along the cost increases, 33 percent;
- Leveraging market data, 25 percent;
- Eliminating or reducing planned promotions, 22 percent;
- Voice-of-customer data/consumer feedback, 20 percent.
The survey comes as vendors on third-quarter analyst calls expressed optimism that surgically raising prices would support their margins while maintaining value across their brands.
James Quincey, CEO at Coca-Cola, said on Oct. 30, “Recent price actions to offset higher input costs have been effective, with lower-than-expected price elasticities to date, and promotional levels remain below 2019.”
Alan Jope, Unilever’s CEO, said on Oct. 28, “There is more pricing still to come, but our pricing actions are thoughtfully planned and carefully executed. We expect a net benefit to topline from the pricing actions that we’re taking.”
Andre Schulten, Procter & Gamble’s CFO, said on Oct. 19, “We expect pricing to be a larger contributor to sales growth in coming quarters as more of our price increases become effective in the market. As this pricing reach[es] the store shelves, we’ll be closely monitoring consumption trends. While it’s still early in the pricing cycle, we haven’t seen multiple changes in consumer behavior.”
On Wayfair’s quarterly call on Nov. 6, Niraj Shah, CEO, remarked about the online home furnishing retailer’s pricing strategy. “What we’re focused on is how do we make sure the customers stay on our platform and the price levels aren’t such that they want to leave and go elsewhere.”
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