Two very famous retailers who have built their business on a low-price image have announced across the board price increases. These were cost based decisions, not related to consumer centric demand. Can you say panic?
I remember the retail world in the 70’s when inflation was out of control under the Carter administration. Price changes were coming so fast that we had to set up a production line process at my company to send the daily new prices to the stores. [This was before bar coding was common, so every item in the stores had to be manually retagged] The urgency of adjusting prices was created by the knowledge that the reorders for new inventory would require increased working capital as prices were raised without notice by vendors likewise panicking. This becomes a self-fueling inflationary spiral that hurts everybody.
The predictable response to this situation will be public outcry about the greedy manufacturers and retailers who are taking advantage of the situation. In the past, this led to price controls that exasperated the situation by creating further economic distortion and shortages of material and products. Unfortunately, the future always rhymes with the past.
The right solution is not to blame the business community but rather to make the hard monetary and fiscal decisions that are politically difficult but nevertheless required. Ah – but where will this discipline come from? Welcome to 2022!Ifn