As the economy recovers from the COVID-19 pandemic, inflation has surged in recent months affecting both retailers and consumers alike. In fact, 56% of retailers have increased profits beyond inflation to boost profitability, according to a Digital.com survey.
“What’s interesting about our findings is that more than half of respondents say that while they used inflation as a reason for price increases, they expect higher profits as a result,” says Digital.com’s small business expert, Dennis Consorte. “In other words, businesses are inflating already inflated prices in order to turn a bigger profit amid people’s fears over uncertain times.”
- The survey revealed that the automobile, e-commerce, electronics and appliances industries were most likely to capitalize on inflation.
- Furniture and home furnishings (51%), health and personal care (50%), clothing and accessories (50%) and electronics and appliances (45%) are the industries most likely to shrink discounts. Businesses are also using pricing tactics such as shrinkflation, increased surcharges and bundling to drive up prices.
“We’re still in a period of fear and uncertainty about the economy and legislative responses to COVID-19. We can expect unusual pricing tactics for as long as this continues. Some merchants will continue to raise prices out of fear, while others will take advantage of their customers’ fears to realize higher profit margins. When the Zeitgeist of our time returns to baseline, so too will merchants in their pricing methodologies,” says Consorte.