McKinsey&Company
Six ways to fight inflation
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Shrinkflation. You’ve probably noticed that groceries and other products are getting pricier. But you may not be aware that package sizes are shrinking, too. To shave costs and avoid price hikes that could hurt sales, companies are turning to “shrinkflation.” Cereal, chocolate bars, soap—anything in a package can be downsized. Some companies say that consumers favor buying cheaper goods, even when sizes are smaller. Shrinkflation is everywhere, but consumers can shop in stores where products are sold by weight or compare prices online. [Bloomberg] |
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Cutting jobs. Retailers are struggling amid high inflation and an excess of inventory. In May, the US retail industry cut more than 60,000 jobs. Big-box stores and grocery stores were among those slashing the number of employees on payrolls. As consumers spend more on services like traveling and going out to eat, many retailers are reporting lackluster earnings. Recalling the supply chain problems that led to empty shelves and shortages late last year, many department stores and warehouse clubs overstocked in early 2022. [WSJ] |
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Looking for value. Retailers are squeezed between rising costs and some slowing sales. So far, US household spending hasn’t been meaningfully affected, but there are early signs of a possible pull-back. Consumer confidence slipped in late February, per the latest McKinsey Consumer Pulse Survey. Just 38% of respondents said that they felt optimistic, down from 44% in October 2021. Shoppers are looking for value, with more US consumers reporting switching brands and retailers in 2022 than at any time since the COVID-19 crisis began. |
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How retailers can win. Retail leaders are facing the possibility of persistent inflation. But it’s still possible to respond in a way that retains customers and propels long-term growth. For instance, rather than broadly raising prices, which may erode consumer trust, retail leaders can tailor price increases by customer and product type. Companies that outperform during economic downturns tend to surpass their peers over the decade that follows, McKinsey research shows. See six ways for retailers to address inflation and become more resilient. |
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| — Edited by Belinda Yu |
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