2011 - A chance for retailers to slip in some sneeky price rises?

The latest inflation figures for the UK economy don’t make very encouraging reading - particularly for households affected by wage freezes or reductions ahead in 2011. But this article in Management Today suggests that prices may rise even faster in early 2011 for two related reasons - the increase in VAT to 20% and retailers looking to improve their gross profit margins whilst consumers are expecting price changes! Its a sneeky, but understandable tactic. You can imagine the scenario - the customer comments that prices seem to be higher than before Christmas; the obvious response is to blame Osborne’s VAT rise and hope that the customer doesn’t (or can’t) do the mental maths to check the explanation!

There are some excellent evaluation points made in the article which students could use to assess whether this pricing tactic will work. The retail market remains highly competitive and if some retailers don’t implement price rises then they may find customers are able to spot the emerging price differentials and switch their custom. But if you’re out shopping in early Jan 2011, watch out - and take your iPhone calculator with you.