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Our Thought Provoking Insights

Inflation – a growing retail headache

The latest ONS data confirms that inflation has some way to go yet before peaking. This issue has become the major preoccupation of retail leadership teams. Such a steep rise in costs within such a short space of time is unprecedented. Take clothing for example. The market has barely seen any price inflation at all for 15 or more years. In just a few months, it’s up at c12%.

Of course, anyone can simply pass these costs on in their entirety. But in a contracting market, with consumer confidence falling, can any brands be sure their customers will simply pay the price and keep buying as before? This is the kind of challenge that asks the most fundamental of questions: how strong is your brand? How loyal are your customers?

There are no silver bullets here. Retail enters this period in a brittle state, bruised and battered by lockdowns. Many have relied on Government support both directly (furlough) and indirectly (loan guarantees). The underlying pattern of trading has become far more complex to understand, even for this close to the real numbers. But against this is the fundamental reality of trading: it is imperative to defend market share and if you have the belief, this is the time to invest in your business.

I mean invest in the top line, even if that means sacrificing some of your profitability. This period of strong inflationary pressure has some way to go yet, but it will not last forever. The key is to get through and exit competitively stronger than before. That’s more about market share and less about margin.

Maximizing share is all about having the right product, at the right price, at the right quantities in the right places. Beyond the skills of your Buying, Planning, and Merchandising teams, you need sophisticated models to leverage your data to get all these judgments right. Pricing has become fluid and dynamic. Not just in frequency of change but across your entire offer, at SKU level. A once-a-season, one size fits all approach will no longer work.

At TPC, we advise retailers on optimizing their inventory management using data science to forecast demand at granular levels. Have any questions? We’d like to hear from you! Find us on LinkedIn or contact us via our website to learn more.


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