Cost fluctuations refer to the dynamic changes in the prices of goods and services that retailers must pay to acquire inventory for sale. These fluctuations can be influenced by various factors, such as changes in raw material costs, currency exchange rates, transportation expenses, and market demand.
When costs increase, retailers may face challenges in maintaining profit margins, as they must decide whether to absorb the cost increase or pass it on to consumers through higher prices. Conversely, when costs decrease, retailers may have opportunities to lower prices and attract more customers.
Cost fluctuations can significantly impact a retailer’s profitability and require effective strategies in pricing, inventory management, and supplier relationships to navigate the volatile market conditions and ensure sustainable business operations.