The last two-plus years have been trying on retailers and consumers alike. While retailers have struggled with supply chain challenges and increasing costs, consumers have felt the other side of those pressures with out-of-stock items and higher prices.
There has been some semblance of a return to normalcy pandemic-wise, but ongoing issues around geopolitics, the cost of fuel, and high inflation keep consumers and retailers around the world struggling to handle shrinking margins and a cost-of-living crisis. So, how are consumers in different regions adapting and what pricing strategies are retailers leveraging to mitigate the problem?
During this inflationary time, consumers are largely becoming more disciplined when it comes to discretionary spending. They are looking for value instead of remaining loyal to brands. Particularly in the United States, consumers are still spending but are more likely to wait for markdowns and promotions to make a purchase.
The European Union is more pragmatic when it comes to spending. Two-thirds of the bloc has a negative outlook on their country’s current economic status and three-quarters have either changed shopping behavior (e.g. seeking other brands) or plan to in the next three months. There are also several nuances from country to country that make it a challenge for retailers, especially those with multinational operations. For example:
In North America, inflation remains worrisome in the U.S. Particularly in the grocery sector. August figures show inflation has slightly eased from its 40-year high in June 2022, but when factoring out prices for volatile goods such as fuel and food, prices actually rose. Canada is also in a similar place, as recent Bank of Canada data shows.
Almost two years in and we’re still not in the clear from high prices. But finding that balance between what your consumers want and what your bottom line needs is no simple task. This is where AI can help retailers navigate the constantly changing market and mitigate cost increases.
An AI-based price optimization platform can factor in all the different variables that make up consumer demand. At the same time, it can also help retailers respond to ongoing cost increases. With predictive analytics, retailers can analyze and make informed pricing moves with pinpoint accuracy, gaming out the various options and scenarios to find the most optimized prices in an inflationary market.
With consumer confidence remaining low, retailers need a strong and strategic pricing response. Inflation isn’t new to Revionics. We’ve helped retailers through economic ups and downs before. For other ways to hedge inflation through pricing, download our inflationary pricing guide or reach out to our experts today.