Prices in stores are getting higher and more increases are coming. The situation will likely hit consumers the hardest in fall, and then once again before Christmas. After a near 4% increase in July, consumers should be prepared for a post-vacation increase of about 5%. And this is rather an optimistic scenario, which will materialize if nothing new shakes the market. Meanwhile, the year might end with prices even 6-7% higher. There are, of course, many reasons for the present and predicted increases. Among them are inflation, rising gas and electricity prices, wage increases, and an improvement in consumer sentiment. Retailers are still effectively “cutting” prices due to the price war among networks, but this may not last much longer. After the holidays, retailers will want to recover their costs, which will mean an additional price shock for consumers.
By observing the current actions of retailers and knowing the results of market analysis and observations, it can be stated that the dynamics of price growth have been steadily rising for at least four months. According to the latest report titled “Retail Shop Price Index”, in July, everyday purchases were almost 4% more expensive than a year earlier. For comparison, in June the annual increase was just over 3%, in May – just under 3%, and in April – over 2%.
The cited increases are obviously related to the general increase in inflation noted in recent months. There is also talk that this increase in prices is due to the thawing of VAT. This is true, but it must be noted that the aforementioned tax was reinstated in April, several months ago. Therefore, now we should speak of other factors that shape the prices on the shelves.
Delving further into the reasons for the increase in shop prices, one must note that manufacturers – particularly small and medium-sized ones – play a significant role in this matter. They are the ones who first face additional costs.
Production price increases have been held at bay due to the price war among the largest discounters in the market. Currently, hypermarkets, trying to rebuild their market position, are joining this battle. Also participating are convenience store networks, seeking to lure away spontaneous customers from discounters.
However, the battle between discounters has not only slowed the increase in prices, but various formats have also tried to take advantage of it. Consumers may enjoy this, but it cannot last forever. Retailers are not charities; they need to calculate their costs accurately and respond quickly to the situation.
By completely sidelining this issue, it might seem that the current price war among discounters is losing steam, as these activities lack novelty and dynamism. Some argue that the fees incurred for this type of war aren’t worth the long-term gain for businesses. These conclusions can be drawn from the recent financial results of one of the main discount stores in Poland.
Looking ahead, it’s evident that consumers may be exhausted from seeing the same advertisements showing how one chain is cheaper than another. Retailers will certainly undertake new actions, and thus the price war – in one form or another – must continue to play out in the market. However, it will not save consumers as much money as it does now, and thus store prices will increase again.
In the fall, store prices are likely to grow by about 5% year on year. Beyond domestic factors, the global situation could cause additional harm. If, for example, the conflict in Ukraine escalates or something happens in the Middle East, the situation here will also get complicated. Additionally, a potential increase in consumption in line with the purchasing moods of Poles will lead to a significant rise in prices.
To sum up, consumers should expect a steady increase in prices across most categories. Manufacturers and retailers will not think about discounts, but rather about raising prices in such a way that it is not too visible to consumers.
Commentary by Robert Biegaj, retail market expert from Offerista Group.
Source: https://ceo.com.pl/r-biegaj-w-sklepach-bedzie-coraz-drozej-koniec-roku-moze-przyniesc-wzrosty-cen-nawet-o-6-7-proc-r-r-51389
