Get Ready For Some Serious Price Increases

Discussion in 'Budget Board' started by Purseval, Apr 1, 2011.

  1. Purseval

    Purseval DIS Veteran

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    If the low-cost leader with all of their buying power is expecting problems imagine what smaller retailers, grocery stores and places like WDW restaurants are going to do.

    http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm

    Wal-Mart CEO Bill Simon expects inflation

    U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday

    The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

    Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

    Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.

    "Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

    Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.

    The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.

    "We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."

    Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.

    Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."
     
  2. BridgetBordeaux

    BridgetBordeaux DIS Veteran

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    When gas hit 4 dollars a few years ago, the prices went up and some product packaging was downsized. It seems we may be getting round number two soon. It certainly not very fun to see the packages get smaller and bill get larger than before at checkout!
     
  3. Marionnette

    Marionnette Children see magic because they look for it

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    I saw that report yesterday and I thought the same thing. I don't know how people who are living hand to mouth now are going to make it through. There's a big disconnect between the people who keep tell us that we're on the road to recovery and what's really happening on Main St.
     
  4. DZNEE4US

    DZNEE4US Mouseketeer

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    When the last economic crisis happened, (Fall 2009) my husband lost his job. He was in an automotive related business, and the company was known to never let people go. When gas prices go up, people are not looking to buy larger SUVs or trucks. When gas goes up, it hurts every aspect of our economy in one way or another, it affects everyone. Food and general merchandise prices go up because of the cost to transport items. $4 and $5 gas is what really let to the recession. People can only be squeezed so much. You have to get to work, so you have to buy gas. You have to eat, so people have to buy some sort of food. Are people going to be eating out and buying steak more often? Probably not. I see places like Aldi's continuing to expand in this economy.
    By the way, my husband is now in a bio tech company, and isglad to have automotive behind him. It's just too risky with fuel demand and pricing.
     

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