Rising business costs and falling profits are among the reasons why retailers often see no other choice but to increase prices.
While this decision is often not taken lightly, new research carried out by global consulting firm Simon-Kucher and Partners found that upping the price tag didn’t pay off for the majority of retailers surveyed.
According to the Global Pricing Study, conducted every two years in collaboration with the Professional Pricing Society (PPS), only around 39% of businesses managed to achieve their increase objective after they pushed up prices.
This percentage is down from 50% in 2012 – a sure sign that customers are seeking the cheapest deals.
Small retailers shouldn’t be deterred by price pressure
The ongoing price war between the big supermarkets hasn’t helped the situation for small businesses in the retail sector. The general consensus is that this has conditioned consumers to expect bargain prices and discount deals, which SMEs usually aren’t in a position to compete with.
However, Mark Billige, Managing Partner at Simon-Kucher & Partners in London, believes small businesses shouldn’t be deterred by price pressure and should instead focus on providing quality products.
He said: “Price pressure, price wars and competition shouldn’t hold businesses back from achieving the prices they want.
“If you know the true value of your product, you can set the right price. This also means having the courage to kill new products if it becomes clear that they won’t meet their profit targets.”
The Global Pricing Survey questions more than 1600 directors and managers across all industries in 40 countries in order to get a worldwide perspective on business issues concerning price.