Inflation and Its Effect on Retailers

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's Inflation and its effect on Supply Chain Industry (Retail) By Kamal Deep Introduction This white paper details out how inflation is affecting the Retail economy and its health. This paper also suggests what care needs to be taken by the Retailers for tackling inflation. Purpose of this Project For applying the Macro Economics class room learning’s practically Scope of this Project Inflation effects are discussed only for Retailers in Supply Chain domain. Evaluating effects on Retail industry by Inflation (Demand pull, Cost push), Deflation is in scope of this project. About Inflation: Inflation is an increase…show more content…
Buyers in essence “bid prices up”, again, cause inflation. Inflation can have effects (negative or positive) during demand driven. Effects of Demand Pull Inflation are: 1. Fluctuation of prices: Usually the prices of goods go higher during inflation, especially the prices of commodities. It makes consumers to change their speeding habits. When prices increase, people tend to spend less and which affects the revenue and profits of Retailers. 2. Sales under Pressure: Before the fluctuation, consumers subsidized their spending through credit or dipping into savings, but this is no longer achievable or sustainable. As a consequence both margins and sales are under pressure. 3. Decision on Pricing Strategy: Retailers should take decision on pricing strategy when demand is weak. To take the hit on volume or absorb the increased costs and sacrifice margin. 4. When Price inflation occurs, same time as consumers adjust their spending to reflect their new financial realities. 5. Knowledge on price and Good: As price varies frequently retailers therefore have less experience of the relationship between price and volume and of how consumers will respond to price rises. 6. Increased risk: Risk increases due to higher uncertainties due to instability of prices. 7. Retailers has to sacrifice margin to avoid alienating their
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