April Marks Three-Year Anniversary Of Falling Shop Prices

The latest BRC-Nielsen Shop Price Index shows that overall shop prices saw deflation of 1.7% in April, marking three successive years of falling prices as retailers battled to win customers on the fiercely competitive high street.

Non-food deflation accelerated to 2.9% in April from the 2.6% fall in March, amid heavy discounting by clothing retailers.

Meanwhile, food returned to inflationary territory, up 0.1% in April compared with the 0.4% decline in the previous two months. With the supermarket chains battling to attract customers, fresh food costs fell 0.5%. However, ambient food inflation rose further in April, up 1.0% from the 0.4% rise in March.

Helen Dickinson, Chief Executive of the British Retail Consortium, commented: “The thirty-six consecutive months of price falls is being driven by intense competition across the industry. It has knock on implications for margins and profitability given the combination of continued investment in digital and rising cost pressures, compounded by recent policy announcements.

“Ensuring they do not pass on these cost increases, alongside the intensity of competition in the market, are the principal reasons why retailers continue to respond to their customers’ demands for value. As this month’s figures show, this has helped shoppers and kept inflation (and therefore interest rates) low to betterment of the UK economy.”

Mike Watkins, Head of Retailer and Business Insight at Nielsen, added: “Whilst some food prices have stabilised this month, this is partly due to external factors, and will probably be short term. The underlying trend in shop prices is downwards with continued price cutting by Supermarkets which is driving deflation. Further discounts may also be necessary on the high street as the cool spring has impacted the sales of many retailers, and an increase in the levels of promotion over the next few weeks to drive footfall is not out of the question.”

NAM Implications:
  • On balance, suppliers need to anticipate the continuation of flat-line demand for the foreseeable future (pragmatic NAMs will use 2 years…)
  • …with appropriate maintaining of price/support demands from major customers
  • Action: Time to search for further internal cost savings?