$6 billion retailer

Can price hikes be dialed back after they sweep through an industry? As inflation soared in the U.S., a major U.S. retailer saw many of its vendors had quickly lifted their prices in response, but as inflation cooled it became clear it was time to push back on increases that had gone too far. 

AlixPartners stepped in to create a fair, efficient tool for monitoring commodity prices to ensure that requested price increases were justified. This system proved that the majority of cost increases were oversized, which allowed the team to renegotiate to mitigate around 20% of cost increases (totaling $20 million) by tying product component costs to commodity movements. In parallel, AlixPartners competitively sourced the Private Brand assortment, driving 10% ($18 million) in savings benefits while diversifying the supply base outside of China. 

The AlixPartners team didn’t stop there. They recognized that this commodity peg could also be used to create tailored negotiation packs when commodities dropped more than 10%, allowing the retailer to recapture an additional $18 million by renegotiating past cost increases. This new approach to pricing ensured that the retailer paid vendors a fair price for product, and freed up capital for the retailer to double down on its growth ambitions.