Real Inflation — Let’s get a few things cleared up. First, inflation is definitely super high; this is confirmed. Second, the metric most commonly used to measure inflation (CPI) is pure garbage (remember “Owner’s Equivalent Rent”?).
So if both of these things are true, how can we be sure inflation is what we think it is? Well, let’s see if companies like Harley Davidson or Walt Disney have anything to say about that.
It turns out they do. As illuminated by the WSJ, consumer-facing firms like the two listed above and many others are finding creative ways to manage inflationary cost pressure… by taking more money from you. Sure it might hurt your wallet, but honestly, some of these strategies are pretty damn impressive.
First, let’s take a look at the company whose logo is ritually tattooed on way too many customers’ bodies. Harley Davidson doesn’t like to raise prices. Their customers are loyal to them, so they want to return the favor with minimal price increases. However, Harley has no problem sneaking in other fees to cover their ass.
Last year, the motorcycle king added a materials surcharge between $850 and $1,500 across all their products to stomach rising costs a little better. And man, did it work out well. Both revenue and EPS beat in Q4, leading to that +20% jump $HOG saw last week.
But for some firms, the loyalty of customers really doesn’t matter. Just look at Disney, whose parks and other product costs might be the most inelastic of any consumer product. The Mouse House eliminated several free services at their (in)famous parks, such as cutting the formerly free airport shuttle service “Magic Express” and charging $15 for fast-pass reservations, which also used to be free.
This allowed the firm to keep base ticket prices the same, at $109, despite the fact that parents of young kids would 100% pay just about any price to visit the “most magical place on Earth.”
But restaurants, unfortunately, find themselves in a totally different situation. Lacking the loyalty and inelasticity that the previous firms wield, restauranters had to get creative. Rather than adding fees or increasing costs, many food establishments have simply kept prices the same but cut portion sizes.
Grocery stores have adopted a similar strategy, and while many customers don’t even notice the difference, the ones that do are pissed. So pissed, in fact, that big dawgs like the Consumer Financial Protection Bureau and Joey B’s administration have started looking into what they call “junk fees.”
It’s unclear exactly what these agencies may do to remedy the issue, but the problem of hiding “junk fees” is so widespread that we could soon see executive action to protect your wallet.
But don’t be surprised if they raise your taxes in order to do so.
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