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Industry Insights

The Impact of Supply Chain Pressures on Retail Prices

By October 24, 2021No Comments

A quick Google search highlights continued price increases and inflationary pressures coming from all of the major FMCG suppliers.  In September & October our inflation tracker saw a significant spike (+1% month over month) in the average price paid by shoppers.  The news was rough for consumers across the board.  Everyday prices resumed their climb that had temporarily paused in late August/early September.  Both promotion frequency and depth of discount declined significantly in September with promotion levels now inline with May of 2020 just after the onset of the COVID-19 pandemic making it tough for consumers to find savings. 

Retailer Pricing Strategies

Price increases remain broad-based across the store with all major department at least 6% year over year.  The largest price increases are seen in Non-Consumables and Meat/Seafood with prices up over 10% in some categories.  Retailers of all pricing strategies are passing on price increases to consumers but strategies are differing: 

  1. High-Low retailers’ everyday prices are up over 3% vs. 2020 prices, but the average price consumers are paying is up significantly more. High-low retailers who typically rely on promotions are pulling back on frequency which is driving up the average price paid. 
  2. Everyday Low Price retailers are also seeing a steady rise in everyday prices. EDLP retailers were temporarily offsetting everyday price increase with short term promotions that are now starting to decline. 

Supply Chain Woes Drive Prices

The impact of Supply Chain pressures on pricing is starting to come into focus.  In September and October out of stocks have climbed with more than 1 in 10 products out of stock at the average store.  Categories with the highest out of stock rates are seeing significantly higher price increases due to limited supply and input cost increases.  As an example, categories with out of stock rates above 15% have price increases 38% higher than the average category.   

There really doesn’t seem to be any respite for consumers.  For retailers it is now more critical than ever to have complete, accurate and timely competitive pricing data to stay on top of pricing activity in your market and deep data science to identify the items that drive your shoppers Price Image of you so you can hold prices on key items to maintain loyalty while increasing prices on background items to protect margins.