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The relationship between Canadian shoppers and retailers is turning frosty. Are grocers really taking advantage of consumers’ misery?

Our neighbors to the north have had it with sky high grocery prices, and they’re pretty sure Canada’s three largest grocers — which are all enjoying increased profits — are part of the problem. After months of public criticism, including a call for a boycott of Loblaws, the government recently opened an investigation into accusations of anti-competitive practices.

COULD IT HAPPEN HERE?

Our friends at RetailWire wondered whether U.S. grocers might come under similar pressure should inflation continue to rise. And if they do, what’s the appropriate response? 

The consensus among participants in a recent online forum is that coordinated price-gouging would be pretty hard to pull off here in the states because, unlike in Canada, the U.S. marketplace is so darn competitive. If Kroger raises its prices too high, consumers will just go to Walmart or Aldi or any of the dozens of other chains fighting for a bigger piece of the pie. (Though one poster did suggest regulators considering the Kroger-Albertsons merger take note of what can happen when there’s not enough competition.) 

But there’s still a lesson to be learned from what’s happening north of the border. Clearly, consumers are sensitive to rising prices at the supermarket. They also read the newspaper, so they know exactly how well grocers have done during the past two years. And it kinda ticks them off. So retailers need to proceed with caution. If you can, maybe take a little less margin in favor of the higher penny profit that comes with inflation. Because now more than ever, according to one RetailWire panelist, “Grocers who aren’t watching their price points can miss the cues that send their customers off to lower price competitors.” 

Of course, some price increases are unavoidable, but particularly in this environment, retailers need to tell shoppers why they’re necessary. Communication, especially with your most loyal customers, is the key to keeping them. Consumers aren’t unreasonable. But they can’t understand what you haven’t explained. Is it bird flu? The war in Ukraine? Fair wages? If you know the reason for a price increase, share it! Transparency is always appreciated. And it’s way better than letting customers think that you’re taking advantage of them.

Loblaws’s response to accusations of profiteering was to freeze the prices of more than 1,500 of its No Name private label products through January. A day later, Metro announced it wouldn’t raise prices on any own brand or national brand products between November and February — though it acknowledged it rarely raises prices during the holidays anyhow, so don’t give the chain too much credit. 

PRICE FREEZES A WIN-WIN

We’ve seen similar pledges, albeit on a smaller scale, from U.S. retailers as well. They go a long way toward making consumers feel like you’re in this thing with them. Plus, they help burnish your reputation for offering good value. And if you take a page from Loblaws’s playbook and freeze prices on private label products, you also boost awareness of the line and drive trial. So it’s a win-win.

Bottom line, some price increases are inevitable, but how retailers handle them will determine whether customers stick with you or look for better deals elsewhere.