Price increases on the way from many retailers, but not all
After many months of running promotions and offering cut-price deals, which have added to the woes of the retail sector, there is now some inevitability about price rises being introduced.
By Glynn Davis
With the promotions bonanza of last year having killed the margins of many merchants and resulted in the collapse of others there is now no option for many retailers other than to increase their margins if they are to survive and come out the other end of the downturn intact. And this means price increases.
The problem is that with consumers now used to filling their baskets with deals and promotions it will be very difficult for retailers to up their prices. They have the big headache of working out where to allocate price rises without losing customers. It will lead to much experimentation and the close monitoring of sales figures.
Those who better manage the fine balance between price increases and retaining customers will successfully restore their weak margins and bring back some profitability to their businesses. Those who fail are heading for the wall.
For those retailers facing this balancing act it would have been painful to hear Nick Robertson, chief executive of Asos, suggest at the Retail Week conference last week that he had some margin to play with, which would indicate that he is up for the fight against rivals who still regard price as a key battleground and are up for a scrap.
For those retailers that have found Asos a formidable competitor so far must view this as a chilling reminder of just how powerful a position this business now finds itself in. And just how much more fight it has in its belly to take even more market share away from the established fashion retailers.
glynnd@theretailbulletin.com
