A Review of the Effects of Currency Devaluation on Retail Business Pricing Strategies: A Case Study of Supermarkets in Niger State
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Background of the Study
Currency devaluation is a macroeconomic phenomenon in which the value of a nation’s currency relative to foreign currencies decreases. For retail businesses, including supermarkets in Niger State, currency devaluation poses significant challenges, particularly regarding the pricing of imported goods and the overall cost of doing business. As the naira depreciates, supermarkets face rising costs for imported products, which may lead to higher retail prices, reduced profit margins, and altered consumer purchasing behavior (Salman & Kalu, 2023).
Supermarkets, which rely heavily on both local and imported goods, are particularly vulnerable to currency fluctuations. Currency devaluation often leads to price hikes in food items, beverages, and other essential products, directly affecting the purchasing power of consumers in Niger State (Olayiwola & Jibowo, 2024). Retailers are faced with the dilemma of adjusting their prices to reflect these cost increases while maintaining customer loyalty and competitive advantage. This study aims to review the effects of currency devaluation on pricing strategies employed by supermarkets in Niger State and to explore how these retailers are responding to the challenges posed by currency fluctuations.
Statement of the Problem
Supermarkets in Niger State are experiencing challenges due to currency devaluation, with many struggling to find effective strategies for adjusting prices without alienating customers or sacrificing profitability. The issue is compounded by the fact that many supermarkets lack the flexibility to pass on all cost increases to consumers, which could lead to reduced sales and negative brand perception (Jibril & Yusuff, 2023). This study will review the effects of currency devaluation on retail business pricing strategies in supermarkets in Niger State and offer recommendations for how these businesses can navigate the financial pressures of a devalued currency.
Objectives of the Study
- To evaluate the impact of currency devaluation on pricing strategies of supermarkets in Niger State.
- To assess the relationship between currency devaluation and consumer purchasing behavior in supermarkets in Niger State.
- To recommend strategies for supermarket retailers in Niger State to effectively manage pricing adjustments during periods of currency devaluation.
Research Questions
- How does currency devaluation affect the pricing strategies of supermarkets in Niger State?
- What is the impact of currency devaluation on consumer purchasing behavior in supermarkets in Niger State?
- What pricing strategies can supermarkets in Niger State adopt to mitigate the effects of currency devaluation?
Research Hypotheses
- Currency devaluation leads to significant increases in the prices of imported goods sold by supermarkets in Niger State.
- There is a negative correlation between currency devaluation and consumer purchasing behavior in supermarkets in Niger State.
- Supermarkets in Niger State that adopt dynamic pricing strategies during currency devaluation experience better sales performance than those that maintain fixed prices.
Scope and Limitations of the Study
This review will focus on supermarkets in Niger State and examine the effects of currency devaluation on their pricing strategies. Limitations include the reliance on secondary data and the potential lack of detailed information on pricing strategies across different supermarket chains.
Definitions of Terms
- Currency Devaluation: A reduction in the value of a nation's currency relative to other currencies, often resulting from economic factors such as inflation or trade imbalances.
- Pricing Strategies: The methods used by businesses to determine the prices of their products, considering factors such as cost, competition, and consumer demand.
- Supermarkets: Retail businesses that sell a wide range of food and household products, often in large quantities and at discounted prices.
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