Monday, March 23, 2020

When the Lockdown is Over It is Going to Be Time for Many of You to Raise the Prices of the Goods You Sell and the Services You Offer

From today's EPJ Daily Alert, I put out the following notice because of the mad amounts of money the Fed is printing right now:
It is possible out of the gate that the Consumer Price Index won't reflect the accelerating prices. Remember, the CPI is an index and in that index will be goods and services relating, for example, to the airline and hospitality industry where heavy discounting may occur to get customers traveling again.

However, there will be other sectors that are just going to explode because of pent up demand.

If you provide a service such as haircutting or manicures or you own a restaurant or bar that is popular and you know customers will be returning in droves, you should consider increasing prices right out the gate by 10% to 15%. The market will support the increase. This goes for any other business where demand is likely to be pent up. Raise your prices right away, customers are going to want your product or service and will pay the higher price, a price that should stick long-term...
In short, prices will be higher where you want to spend your money and lower where no one wants to spend money.


  1. There are lots of assumptions in what you write:
    1) Demand is going to rebound to December levels. This assumes people will want to associate with others quickly. Even if the virus ends TODAY, people are weary of contact with others. The thing is, the virus will take awhile to dissipate...the weather in California is not the weather in Wyoming nor Chicago...warmer temperatures will reduce the spreading of this virus but will not eliminate it completely. People are in such a panic...people are going to want assurances that everything is back to how they were...and this will take months to occur.

    Business are being squeezed, people are not buying things and watching what they are spending and only buying essentials. Everyday this persist the average American goes in debt....because they are not collecting an income. Trump's plant of a moratorium on mortgages will kill the banking sector. What Bank is going to LOAN out when they are not collecting on CURRENT loans? The real estate market is the next bubble to burst.

    I don't know where you are getting that there is this pent up demand to sit on plane or buy a car? People are GOING DEEPER into debt. The FED may try to reflate the bubble and possibly may succeed...but not sure we will see an increase in CPI. You seem to always seem to always point to half the picture...always from the supply side.

    1. Did you read anything I said? Where did I say there was going to be pent up demand for plane flights?

      I said the exact opposite.

      The kids were not afraid of covid before the lockdowns. They sure as heck are not going to be afraid of bars after the lockdown.

  2. Since when do broke college kids drive an economy, muchless pay even for their college. There wont be demand for much of anything. The bubble just popped, there's talk of massive lay offs...yet you think demands is going to be skyrocketing for haircuts and martinis at bars?

  3. Agreed there is a fundamental misunderstanding here no one has any money
    41% of Americans do not have one month of saved money
    and most in a 71% service economy have lost their jobs
    -- investment properties are going in the hole no tenants paying rent impossible to evict --

    - word around everywhere is Do Not Pay your credit card -- Do Not Pay your Landlord -- Do not pay your car loan ---- worst case they sue you and you negotiate 1/2 -- the courts could not take the volume if everyone sued --- the courts would never award interest ---
    What will they do tell Ford to repossess 5 million cars even if they did where would they store them and how would they sell them and to who
    no one has any money they have no job - the car is now free the government will bail out the car company.......

    1. Another one.

      Did you read what I wrote?

      The headline says it all: "When the Lockdown is Over"

      Do you seriously think Ford is going to repossess 5 million cars?

      Or that people are going to be evicted for missing a month's rent during the crisis?

      Not going to happen.

      You have no idea of how the economy or politics work.

  4. Denzel -"when the lockdown is over". And when exactly will that be? Each day this extends the burst..and much further extens the recovery.

    You think those venture capitalist flowing money into the bay area are chomping at the keep pouring good money over bad to ecomm business that promise to make a profit in 4 to 5 years?

    The bubble burst...these suckers who dumped money in the bay area will pull back. The party is over...the realestate market is next.

  5. Interesting responses. I like RW's suggestion with the caveat that each business operator must respond to his particular customer base. However, in those businesses that have actually been shut down it makes sense that there would be some pent up demand. Particularly in the service sectors.