Losses and loyalty: the expert told about the consequences of price restraint for retailers

Voluntary limitation of price increase up to 10% on the basic food set, which was reported by the largest Russian retailers, will cause them losses, but will increase customer loyalty. Mikhail Burmistrov, CEO of INFOLine-Analitika, voiced this opinion to the Made in Russia project.

"Business was the first to take a step towards the state, despite the fact that it itself is in the "price scissors". We have seen a serious increase in logistics costs, the cost of packaging, staff salaries and so on has risen," he said.

According to him, the announced level of markup is about 1.3-1.5 times lower than the actual cost of the retail chain for logistics, staff, store rent and utility bills. As a result, this decision will entail losses from the sale of basic goods. However, in the future this strategy will attract customers who will buy more expensive products with a standard markup along with social products, says Burmistrov.

"This decision (to limit price increases) has positive consequences in terms of GR (Government Relations), as well as in terms of increasing customer loyalty. At the same time, it contains a tool to improve competitiveness and attract customers," he believes.

Commenting on the pricing of products in the country, the expert expressed confidence that state regulation, which was tested in 2021, has serious flaws, as it creates imbalances in manufacturing, wholesale and retail.

More competent in 2022 will be the introduction of food cards, with which low-income citizens will be able to spend a certain amount of money to buy domestic food products, said Burmistrov. "It will become both a tool to support the socially disadvantaged and stimulate domestic producers. Yes, the story about stamps and cards is painful for our country. But let us remember the experience of the U.S., where a very effective program of subsidized purchase of products Food Stamps is being implemented, "- he believes.

Let us recall that earlier the retailers X5 Group and "Magnit" announced the voluntary limitation of 10% trade mark-up on the basic set of groceries. The retailers are ready to maintain this bar in 2022 by including into the taboo list socially important items: bread, milk, cereals, vermicelli, borscht set vegetables.

Made in Russia // Made in Russia

Author: Maria Buzanakova