UK Retailers-Are they headed in the Wrong Pricing Direction?

The current economic situation isn't just affecting the U.S. Retailers in the UK are also facing sharply increasing costs including higher fuel and utility bills, as well as the sudden weakening of the pound and soaring cost increases from suppliers in Asia. In response, these retailers making gambles with their pricing strategies to attempt to pass some of these increased costs onto consumers. But will these strategies back fire and do more damage than good? Will this attempt to compensate cost only reduce volume from customers who are also feeling an economic pinch in their personal finances? The situation poses the question: "Is it more important to try and maintain sales levels with a slightly squeezed ... margin, or is it more important to have a better margin with a lower volume of sales?"

"British clothing retailers, facing sharp cost increases, are planning a gamble that could backfire by raising prices next year in what could be one of the worst consumer downturns in 30 years.

Top chains such as Marks & Spencer Group Plc, Next Plc, Debenhams Plc and Top Shop owner Arcadia are not only struggling with higher fuel and utility bills, but also the sudden weakening of the pound and soaring cost increases from suppliers in Asia.

The rising costs present retailers with a major problem.

If they cannot pass the increases on to shoppers -- in a market some analysts reckon could be as tough as the recession of the late 1970s -- their profit margins will be hit, and if they do pass them on their sales volumes will likely suffer."

Read the full article: UK clothing retailers' price gamble may backfire.