Why Retail Partners Will Eventually See Cost Pressures Decline


Retailers like Walmart, Costco, Target, Home Depot, and many others are negotiating prices with their suppliers in categories stretching from food and household consumables to electronics and other durables.  Tim Smith, CEO, Wiglaf Pricing gives his take on the logistics and labor costs involved:

“With free or flowing supply chains, you’re going to see cost pressures, price pressures, and lower those prices with your retail partners. With Walmart for instance. And the idea of high consumer inflation, which we’ve experienced in the past year, five to 10%, depending upon your locale in the States or Europe or the UK, that period of high inflation is going to subside. I’m not saying deflation, I’m just saying high inflation is going to subside.

Logistics and labor costs, once rising precipitously, are now flattening. With freer-flowing supply chains, reduced input cost pressures, and increased federal interest rates, the recent stent of moderately high consumer inflation is bound to subside. But does this claim mean deflation? The threat of broad deflation, like that seen in Japan for around a few decades recently, is low. The prices of all goods are very unlikely to be reduced. That is, the price of a basket of goods at your friendly Walmart is not likely to decrease. This claim is made independent of whether we enter or dodge a recession in the US. GDP can go down even as prices increase. These are two different metrics. Yet some items will see cost reduction in the coming weeks, months, and quarters.”

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