I would not necessarily say that food price deflation is a bad thing for retailers. Nominal revenue is not the most important thing in any business, so it is important to consider implication of the food deflation on profit margins. IMHO, food price inflation (which indeed seems to be coming) may actually put a lot of pressure on profit margins of WOW, and, therefore, decrease overal profitability of the company. Higher consumer prices will only increase the competition between WOW, Coles, Aldi, Costco. Given the high level of competition in the industry and the fragile consumer sentiment it seems logical that it will not be very easy for the retailers to pass through the additional costs to consumers. Just think what will happen if Coles decides not to pass through the rising costs in full and by doing so attempt to win some market share from WOW.
Also, consider the 2008 government enquiry into the retail industry. One of the major reasons for the enquiry was the consistenly high food cpi for a few years prior to the enquiry. So for a retail industry in general, a jump in input costs, can be a real challenge, because very few stakeholders will be happy about it (government + consumers). So I will not be surprised if either WOW or Coles will try to play a tough guy, and attempt to use the inflation as a tool for underpricing its archrival.
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I would not necessarily say that food price deflation is a bad...
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