Stores reluctant to lower prices, despite the example of some large chains | Economy

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Feb 24, 2024 at 7:07 AM Update: 38 minutes ago

Action, Jumbo and IKEA recently announced that they would reduce many prices. It’s a welcome change after a two-year wave of inflation. But many other chains are probably not eager to follow suit, experts think.

Cheaper groceries, furniture and household items: that is what the three chains promise. In doing so, they hope to gain the favor of customers who have seen their expenses increase significantly in recent years. There is also room to reduce prices, for example because energy has become cheaper again.

But retail expert Dirk Mulder of ING does not think that the announced reductions will be followed on a large scale. “We see that costs for companies have risen sharply in recent times, for example higher wages and more expensive energy, raw materials and materials. Companies have not yet fully incorporated all cost increases into their sales prices.”

Moreover, according to Mulder, some costs are still increasing, such as wages. For retail companies, these often represent a significant part of their total costs. The number of entrepreneurs who expect to reduce prices in the coming months is therefore minimal, ING reports. “Retail prices are expected to remain high,” says Mulder.

However, some companies may see their market share shrink and therefore reduce prices. An example of this is Jumbo. It saw its market share decline slightly last year. The chain therefore already implemented a number of reductions last year and wants to continue with this this year.

Companies don’t start a price war

Retail expert Michel Kregel also thinks that large-scale price reductions will not occur. “I do not expect a price war like we have had in the past. That is also not realistic. Some costs are still rising. A retailer runs too much risk if he implements significant price reductions. In addition, there are plenty of uncertainties for entrepreneurs, such as possible wage and interest rate increases.”

It is also a factor that IKEA, for example, has a large part of the supply chain under its own management, says Kregel. “This way they have more control over costs, which makes it easier to do something about the sales prices. This also applies to a greater or lesser extent at Action.”

However, Kregel does not rule out that some chains will do something about the high prices. “Many manufacturers have abused the war to increase their prices. Now prices are stabilizing and energy has even become cheaper. It would therefore not surprise me if some companies come up with price reductions.”

Image: ANP

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