6 Key Approaches To Retail Pricing During Times Of Inflation Insecurity

Inflation is a significant challenge faced by retailers across various sectors, from food to electricity to fuel. In South Africa, consumer inflation is around 5.9% per year and is steadily increasing. So, what does this mean for retailers, and how can they maintain realistic pricing during such unpredictable times? Here are six strategies.

1. Address Hypersensitivity to Pricing Directly
   Price sensitivity can lead to customers switching to competitors over even slight price increases. Customers who exhibit such sensitivity may feel threatened by unpredictable economic conditions. Clear communication is essential in alleviating any misconceptions and anxieties. Retailers should engage in open dialogue with customers, explaining price increases transparently. This approach fosters a sense of loyalty and trust.
2. Build Marketing Programs to Offer Relief
   Ultimately, customers seek value. If you must increase prices, consider implementing promotional tactics that show appreciation for your customers. This could include offering coupons, value-added services, or bulk discounts. Start these campaigns digitally to test your strategy and measure engagement before rolling them out in physical retail environments.
3. Focus on the ‘Trade Up’ and ‘Trade Down’ Customer
   During tough economic times, store brands and premium lines tend to perform better. Customers often search for better prices from store brands in specific categories while being willing to spend more on others. Price your products with this behavior in mind, ensuring you continue to entice value for both budget-conscious and premium customers.
4. Bigger Baskets, Fewer Trips
   Since the pandemic, customers have been shopping less frequently and increasingly online. Their concerns have shifted from health to rising fuel prices, leading them to prefer shopping from home or work. Retailers should find innovative ways to encourage customers to fill their baskets during their weekly shopping trips to maintain profitability.
5. Assess the Competition
   Consider not only other retailers but also hybrid retailers that offer diverse shopping experiences. Many retailers are diversifying to meet multiple customer needs. You may also need to evaluate whether to adopt a hybrid model. For example, a supermarket could offer meal selections or in-store dining to cater to this demand.
6. Pricing Must Consider the Overall Value
   Price increases can lead to decreased demand, so it’s crucial for retailers to ensure each product offers real value. Focus on how to provide customers with both value and quality. Rather than simply focusing on price, consider how you can enhance the overall customer experience.

The Bottom Line
Ongoing challenges such as the war in Ukraine, rising fuel prices, and the impacts of COVID-19 make it essential for retailers to carefully consider their pricing strategies during uncertain economic times. Avoid alienating your most loyal customers by adopting a multi-faceted approach to pricing. If your strategy requires investment, consider a cash advance from Merchant Capital today.