U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.
The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.
Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."
Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.
"Every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along," Long says. "Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."
Consumer prices — or the consumer price index — rose 0.5% in February, the most since mid-2009, largely because of surging food and gasoline prices. Core inflation, which excludes volatile food and energy costs, rose a more modest 0.2%, though that still exceeded estimates.
The scenario hits Wal-Mart as it is trying to return to the low across-the-board prices it became famous for. Some prices rose as the company paid for costly store renovations.
"We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."
Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.
Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."
Alongside rising prices, alert consumers will note the increasingly smaller sizes in retail packaging.
Smaller amounts or weights in canned tuna, potato chips, soup cans, sugar bags, breakfast cereals and many other items have become commonplace.
When's the last time you bought a 6 oz can of tuna fish? Now they're all 5 1/2 or even 5 oz cans. Sure the price is "the same", but you are getting less of the product.
Personally I think processed foods should come with a tax on them...to make up for the money we spend as a society caring for all the people with diabetes.
But thats a seperate subject.
I agree. We could call it the fair fat tax.
Doritos are getting smaller.
Also, variations of product are getting scaled back. We're going back to the days of Cola being one of a handful of available soft drinks.
Coffee will be coffee now, not "Latte" "Frappe" "Grande Venti" blah blah blah ...
I guess a 12,000 mile diesel fueled supply chain for $4.99 products isn't looking like the best business model these days.
BTW - if the CPI was computed today using the same metrics as in 1982 it would be running just under 9% a year. The easiest way for the government and the Fed to keep inflation from rising to the levels of the 1970's is to just change the way it's computed - Orwell would be proud.
Wal-Mart Inflates Prices
No more danger of Walmart's "falling prices"??? Walmart is going to inflate their prices??? Say it ain't so!
Now that the mega box store has run all small biz out of town, it's time for the fleecing to begin.
BTW, how much would it have cost Pop down at the corner store if he asked his new check out girl to "doll up"?
Wal-Mart Inflates Prices
I don't care what Wal-Mart does, I will always choose TARGET as long as they're around
> Personally I think processed foods should come with a tax on them...to make up for the money we spend as a society caring for all the people with diabetes.
>
> But thats a seperate subject.
If it would get rid of the problem I would find a way to pay that tax instead of the medicine I have to take.
Here's one for you. Doctors say that if you live long enough, you will turn diabetic.
as long as you pronounce it correctly...
Tar-zhay
Joe
It's obvious you don't frequent many Wal-Marts because there is no amount of "dolling up" that could be done to justify any increase in prices, ever. Now, if they employed only hooters girls, would you really care that your coke now cost $2.50/can, I think not.
as long as you pronounce it correctly...
Oh, right, sorry about that LOL
Kris
> It's obvious you don't frequent many Wal-Marts because there is no amount of "dolling up" that could be done to justify any increase in prices, ever. Now, if they employed only hooters girls, would you really care that your coke now cost $2.50/can, I think not.
I was referring to this... http://www.walmartclass.com/public_home.html
If the big box store loses, me thinks their prices will REALLY inflate.
Kris
No inflation without demand. No demand due to high unemployment and low wages. Wal Mart is getting hit due to outsourcing all that manufacturing to China. Looks like they'll have to move production back to the USofA where it's cheaper to produce stuff (we're a lot more productive than the Chinese or anybody else for that matter). Apparently free market experiment failed.