How Retailers Should Deal With Inflation

Knowledge@Wharton 08.07.08, 6:10 PM ET With the U.S. Consumer Price Index up 5% for the year ending June 30 and unemployment at 5.7%, many retailers have found themselves in a tough situation, locked between rising product costs and a limited ability to raise their prices. Even cost-savvy market leaders such as Costco are having a difficult time. But Wharton faculty say the current inflationary period, if handled carefully, may actually be a business opportunity for some retailers, especially if they make selective changes in inventory management, pricing and promotions. That new thinking can begin with inventory. According to Gérard Cachon, a professor of operations and information management from the 1990s to 2005, minimizing inventory was seen as a key to success. "The whole mind-set has been, 'Let's get rid of it.' " But... [read full story]