US price inflation rose faster than expected in September despite the Federal Reserve’s best efforts and interest rate increases. In September US price inflation rose +8.2%, surprising analysts and hurting shoppers’ wallets. Leading retailers are able to outsmart inflation leveraging advanced analytics to improve their Price Image.
Price Inflation Drivers
The average price consumers are paying jumped another 148 basis points in September as everyday prices continued to rise. Depth of discount continued to increase in September continuing a string of more aggressive promotions. Promotion frequency however is down vs. prior year as promotions continue to disappear.
Total store prices are up 12%, the largest increase in the last 2 years. Total Store prices were driven higher by Consumables prices, with both Food and Frozen up over 15%. Shelf Stable and Frozen Fruit are the fastest rising prices in the Food and Frozen departments. In Perishables, Fresh Bakery prices are significantly higher while price increases softened in Meat. Prices are rising the fastest in the Southwest and Great Lakes and out of stocks are most common in the South.
Strategies to Outsmart Inflation
In the last quarter, we have seen a significant shift in strategy from one of the world’s largest and most advanced retailers. Historically this retailer held a significant price advantage and prided itself on raising prices slower than the market to drive price perception with shoppers. In the latest quarter they are now closely tracking the market and most recently raising prices faster than the market.
Despite faster price increases vs. the market, their Price Image is continuing to improve. To maintain and improve Price Image 4 strategies are being leveraged:
Strategy | Implacation |
Investing to win on price on a department level basis across their price zones/markets |
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Investing on 806 Private Label Items by Market to Improve Price Perception |
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Using highly surgical and very localized pricing on 889 commodity and KVI items |
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Localizing price based on the presence of key competitors near their stores |
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Now more than ever retailers need to be focused on improving their Price Image. Price Image isn’t always about having the lowest price on every item. Retailers can outsmart inflation by leveraging proven strategies to drive shopper price perception. Every 5% improvement in Price Image translates to a 4.2% increase in store traffic. Winning retailers can accelerate revenue growth, expand margins and drive increased traffic in this inflationary environment.
