Are price freezes and commitments useful in inflationary climates? – RetailWire

April 21, 2022

In response to inflation concerns, Old Navy has implemented a “Price ON-Lock” initiative that will suspend price increases on basic children’s clothing during the back-to-school sale season. For its part, Aldi is committed to being the local leader in low prices.

These measures come as the inflation rate in the United States jumped to 8.5%, its highest level in 40 years, in March.

“Our customers, and parents in particular, are feeling the pressures of inflation and we want to assure them that they can outfit their children for summer and back to school with our everyday kids’ fashion essentials at a price and value guaranteed,” Andres Dorronsoro, Old Navy SVP and Head of Merchandising, said in a statement obtained by Today.

The program applies to Old Navy’s wide range of “Everyday Magic” essentials and will be valid until the end of September. The “Everyday Magic” children’s section includes $5 t-shirts, $10 shorts, and $8 activewear tops and bottoms.

KMPG last year revealed that average back-to-school spending per student would hit $268, up from $247 in 2020, partly attributed to inflation. Inflationary pressures have intensified over the past year due to rising costs for logistics, raw materials, labor and energy.

Grocery prices were particularly hard hit, rising 7.9% year-over-year in February 2022, according to the most recent Consumer Price Index data.

On April 12, Aldi’s US CEO Jason Hart wrote a “price pledge” letter to consumers who undertake to keep prices low.

“Saving you money is what we do best,” he wrote. “And at times like these, I’m incredibly proud to underscore this commitment to you: no matter what happens in the world around us, Aldi will always be the low price leader in every community we serve.”

Mr. Hart concluded: “Whether you’re feeling the pinch at the gas pump or on your home energy bills, you can count on ALDI as a bright spot in your weekly budget.

A survey of Americans CNBC and Acorns Invest taken at the end of March revealed that 75% feared that rising prices would force them to rethink their financial choices in the coming months and 48% thinking of rising prices all the time.

DISCUSSION QUESTIONS: Which do you think will resonate more with customers: Old Navy’s price freeze or Aldi’s low price commitment? Should other retailers take similar approaches or are there other more effective inflation messages?

Braintrust

“Communication around pricing should be tied to the retailer’s overall value proposition.”

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