Jump to content
House Price Crash Forum
Sign in to follow this  
Fancypants

Retail Trauma

Recommended Posts

Now this might be self-evident to some of the more advanced minds on here, but something just occured to me about the "high street slowdown"

as retailers go out of business and the inevitable consolidations go on, presumably this will lower the overall level of competition in the marketplace - in simple terms, there will be fewer sellers and less pressure to undercut prices.

I suspect that some of the deflation that we have seen in shiny consumer trinkets in the last few years was driven in no small part by increased competition among the proliferating retailers. As that force recedes (although we may be in it's dying and most violent phase, like a star going supernova - as retailers discount aggressively to survive) then one would expect that prices will rise more in line with underlying costs (mainly energy, taxes) and add more momentum to inflation.

is this logical?

Share this post


Link to post
Share on other sites

Now this might be self-evident to some of the more advanced minds on here, but something just occured to me about the "high street slowdown"

as retailers go out of business and the inevitable consolidations go on, presumably this will lower the overall level of competition in the marketplace - in simple terms, there will be fewer sellers and less pressure to undercut prices.

I suspect that some of the deflation that we have seen in shiny consumer trinkets in the last few years was driven in no small part by increased competition among the proliferating retailers. As that force recedes (although we may be in it's dying and most violent phase, like a star going supernova - as retailers discount aggressively to survive) then one would expect that prices will rise more in line with underlying costs (mainly energy, taxes) and add more momentum to inflation.

is this logical?

What aout the Internet Retailers, they do not have to be giants to undercut highstree retailers. I think price pressure will always be there, especially people are getting wiser (and getting online more and more)

Share this post


Link to post
Share on other sites

Now this might be self-evident to some of the more advanced minds on here, but something just occured to me about the "high street slowdown"

as retailers go out of business and the inevitable consolidations go on, presumably this will lower the overall level of competition in the marketplace - in simple terms, there will be fewer sellers and less pressure to undercut prices.

I suspect that some of the deflation that we have seen in shiny consumer trinkets in the last few years was driven in no small part by increased competition among the proliferating retailers. As that force recedes (although we may be in it's dying and most violent phase, like a star going supernova - as retailers discount aggressively to survive) then one would expect that prices will rise more in line with underlying costs (mainly energy, taxes) and add more momentum to inflation.

is this logical?

In theory, if consolidation was so severe as to affect competition in some market or other, the monopolies and mergers commission would block the takeover. In theory.

frugalista

Share this post


Link to post
Share on other sites

In theory, if consolidation was so severe as to affect competition in some market or other, the monopolies and mergers commission would block the takeover. In theory.

frugalista

True - but I don't mean to say that we'll see wholesale cartelization (aka Tesco-ification) at this stage - more that the downward pressure generated by the proliferation of retailers will cease, thereby removing that force from the equation.

It has been suggested on here that prices of DVD players etc etc have just about bottomed.

I agree that internet retail is a factor but I think even they are on pretty thin margins now.

Share this post


Link to post
Share on other sites

If competition appears to be lacking then a new player will see an opportunity to enter providing the competition again and the current players will have to meet the new challenge.

It might be that online shopping is the competition and if that is so that has implications for many cities and towns both for tax take and employment.

Interesting times for retail. What proportion of people will still want the "social" occassion of shopping or a "day in town" as opposed to the more functional nature of online?

Share this post


Link to post
Share on other sites

In theory, if consolidation was so severe as to affect competition in some market or other, the monopolies and mergers commission would block the takeover.

Why is there only one monopolies commission? :blink:

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp

In theory, if consolidation was so severe as to affect competition in some market or other, the monopolies and mergers commission would block the takeover. In theory.

What that old dog with no teeth. :)

Share this post


Link to post
Share on other sites

Now this might be self-evident to some of the more advanced minds on here, but something just occured to me about the "high street slowdown"

as retailers go out of business and the inevitable consolidations go on, presumably this will lower the overall level of competition in the marketplace - in simple terms, there will be fewer sellers and less pressure to undercut prices.

I suspect that some of the deflation that we have seen in shiny consumer trinkets in the last few years was driven in no small part by increased competition among the proliferating retailers. As that force recedes (although we may be in it's dying and most violent phase, like a star going supernova - as retailers discount aggressively to survive) then one would expect that prices will rise more in line with underlying costs (mainly energy, taxes) and add more momentum to inflation.

is this logical?

There will always be competition in the retail market. But don't worry because I'm not sure that this is the biggest factor causing retail price deflation in recent years.

Importing an ever higher proportion of product from lower cost countries has made a huge difference to retail prices. In particular, when the US$ was very weak vs £, retailers could buy even cheaper from the dollar-linked Far East. Retailers have been pricing lower because they can, but this might not be so marked going forwards.

In the absence of lower input costs, retailers will be reluctant to cut prices. They are not in the habit of chasing unprofitable sales. In a slow environment, they would probably rather preserve margin and just put up with sluggish volumes.

A few things have changed that make me think retail price deflation will ease over the coming months:

1. The US $ is no longer much weaker YoY, so retailers are not getting significant currency savings that they can feed through to price anymore

2. The strong oil price offsets some of the cost benefit of importing, because transport costs have risen

3. Quotas have been partly reintroduced in clothing

4. There is a limit to the type and number of lines that the retailers wish to import. Heavy goods - not worth it. High fashion - it takes too long to ship it to the UK.

Conclusion: non-food retail price deflation eases. CPI strengthens. Interest rates cannot go down & may even have to go up.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 336 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.