Retailing in times of soaring inflation: What we know, what we don't know, and a research agenda

Abstract

Inflation is back – with a vengeance. Following the highly disruptive years of the pandemic, the world has experienced inflation levels not seen for many decades. A “perfect storm” of underlying causes including expansionary monetary and fiscal policies during the pandemic, pent‑up demand, supply-demand imbalances and commodity-driven cost pressures due to unfavorable weather conditions in various regions and Russia's invasion of Ukraine, all conspired to steeply increase consumer price levels around the world. While current inflation levels are not unprecedented (they were even higher in the 1970s and 1980s), the decades-long period of extremely low inflation experienced in most countries means that current inflation rates continue to shock consumers, manufacturers and retailers. Equally, academic research has very little to say about how to conduct marketing in inflationary times, and that is why this paper presents an overview of what we know, what we don't know and what we argue we should know in the form of a research agenda.

We first review key takeaways from prior inflation-focused research in the marketing literature, along with insights that could be derived from related studies that considered other causes of disposable-income reductions. However, given that the inflation literature is sparse, while insights from other forms of disposable-income reduction may not automatically generalize to the current inflationary setting, we identify various knowledge gaps along with a wide-ranging set of questions in need of further research in marketing and retailing. We do so, in the spirit of the Empirics-First approach to relevant knowledge generation, by identifying several frequently used retailer-initiated coping strategies. We subsequently circle back to pertinent prior literature to help with the interpretation of the observed patterns, identify best practices, and warn against potential pitfalls. We hope that this article will inspire cutting-edge research into the consumer-, retailer- and marketing consequences of extreme inflation, a worldwide problem that affects us all and is directly linked to the core role of retailing in the supply-chain channel.