Most Consumers Will Be Angry if Retailers Raise Costs – 83% of Executives Are Doing It Anyway, According to Report from First Insight

79% of Consumers Say They’ll Pledge Loyalty to Retailers That Absorb Tariff Costs; Lose Trust in Those That Raise Prices. First Insight Suggests a More Nuanced Approach to Pricing.

First Insight, the company that leverages AI to transform consumer feedback into profitable retail strategies, has released the findings of its new Tariffs & Trust: Why Retailers Risk Loyalty with Price Hikes Study. The study reveals that, despite the fact that 68% of brand and retail executives expect a negative reaction from customers–and 73% of consumers confirm they would be frustrated by price increases–83% of executives plan to raise prices anyway. Consumers say they’ll respond to retailers’ decisions with either increased loyalty or decreased trust: Nearly 80% would feel more loyal to brands that absorb tariff-related increases, while nearly 3 in 4 would abandon their favorite brand for a cheaper generic if retail prices rise.

According to First Insight, however, customers’ trust and loyalty is not solely a function of brands’ and retailers’ ability to preserve pricing when faced with market forces beyond their control. To maintain customer loyalty while navigating circumstances that put their margins at risk, 77% of surveyed executives have preemptively communicated price increases directly with customers. For those retailers and brands currently planning to issue blanket price hikes, First Insight recommends they instead engage customers directly to gain insights on what they’d be willing to spend and what pricing would be a dealbreaker on products across categories. The resulting insights can inform more nuanced pricing strategies.

First Insight’s Tariffs & Trust: Why Retailers Risk Loyalty with Price Hikes Study is a comprehensive comparison of retail executives’ and consumers’ perspectives on tariff-driven price increases. The company spoke with 306 CEOs, CFOs and COOs from major retailers and brands, as well as 1,120 U.S. shoppers (3,393 including UK and EU respondents), ranging from 18 to 80+ years old.

Among the U.S. findings:

• For shoppers, any price increase is too much. Nearly one-third of shoppers (30%) said that any increase at all would cause them to shift their spending habits.
• Shoppers are skeptical that some retailers and brands are using tariffs as an excuse to increase prices. Only 24% of shoppers say they fully believe that tariffs alone are the reason for rising costs.
• Despite their skepticism, consumers know that brands are not ultimately to blame for rising costs. Fifty-four percent (54%) of consumer respondents acknowledged that government policy is driving up costs.
• Retailers that increase prices can win consumers’ loyalty in other ways. Consumers said that the top two actions retailers and brands can take to offset the changes are: 1) clear communication–especially around why prices are rising. And 2) introduce new efforts to soften the blow, including offering loyalty points or discounts.
• Consumers promise loyalty to brands that absorb price hikes. A high majority of consumers (79%) say that they would be most loyal to brands that fully absorb the costs themselves.
• Retailers and brands expect price changes before Labor Day. Nearly 3 in 4 (73%) of retail executives said that they believe price increases will go into effect by the end of summer.
• Executives are also paying attention to what their competitors are doing. The majority of executives (60%) said that, if they raise prices, they expect to lose market share to competitors that don’t.
• Holiday shopping is going to be different this year, according to 92% of executives. Almost every executive foresees holiday shopping shifts, with only 8% saying they aren’t expecting noticeable changes. Of those who expect challenges, their top 3 concerns are: Reduced consumer spending (56%), shipping/logistics issues (53%), and product shortages (40%).
• Consumers will be focusing on value this holiday season. Consumers expect that tariffs will influence how they shop this holiday season in three primary ways: They’ll use more coupons and promotions (50%), spend less overall (49%), and buy items based on price versus brand (44%).
• Some retail categories will be affected more than others. Shoppers listed the following three categories as the ones that they would cut back on first due to price increases: Electronics/tech (50%), apparel/fashion (53%), and home goods/furniture (54%).

“We can hear shoppers’ voices loud and clear, and now is the time for retail executives to put what they’re saying to work,” said Greg Petro, CEO of First Insight. “While most retailers won’t be able to avoid raising prices altogether, unilateral price increases are a surefire way to lose customer confidence and trust. There are more informed ways of approaching pricing strategies and offsetting the burden on customers. Customers are forthcoming about what they’ll spend, what they’ll buy and where they’ll tap out–retailers simply need to engage them and communicate what they’re up to every step of the way.”

First Insight helps retailers and brands eliminate risk by integrating consumer feedback into every decision they make, replacing retailers’ guesswork with insight-driven decisions. Since its founding in 2007, the company has helped 600+ retailers and brands successfully navigate economic turbulence, demand shocks, and supply chain disruptions, including the 2008 Great Recession and the COVID-19 pandemic.

You can view the full report here.

About First Insight

First Insight is a global retail platform that uses its native AI to turn real-time customer feedback into profitable strategies for more than 600+ brands and retailers. Companies like Gap, Under Armour, Woolworths and Family Dollar rely on First Insight to understand what consumers will buy, what they won’t, how much they’re willing to pay, and how these and other factors directly influence planning, inventory and margins. First Insight further transforms customer feedback into a Value Score™, assigned to every single product it gains insight on. These scores accurately predict the viability of and demand for products so that retailers can confidently make design, pricing and inventory decisions that will deliver measurable financial impact. The company’s Voice of the Customer Platform is central to its offering and boasts a network of 360+ million consumers spanning 180 countries and 67 languages and currencies. First Insight was founded in 2007.

Learn more at: www.firstinsight.com

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