Retail food prices and competition in retail pricing

Tunyoginé Nechay, Veronika

Keywords: retail food prices, consumer price index, price competition, frequency of price change parameters and price level, first margin, underlying terms

The consumer price index of foodstuffs has been increasing at a rate higher than inflation for years despite the growing competition between food retail units. The strength of competition is characterised by a balanced make-up of the food retail operations, as indicated by the absence of changes to the relative market share held by the six largest market players. Price is the most frequently used tool in this competition. Lower prices can be introduced as special prices or lowered prices. The trends in average retail price is confirmed by an analysis of the frequency of the various price changing operations (special prices, lowering of prices, increasing of prices and leaving prices unchanged), as well as that of price levels. In the types of retail units selected for the paper, price increases occur more frequently than special prices and price reductions – the signs of price competition – combined. The types of unit do not significantly differ in terms of their average retail price levels either. Apart from macroeconomic influences, the rising of retail prices may be associated with the distribution of power along the food chain, as well as the prevailing market mechanisms (underlying terms, prohibition to sell below purchase price).

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