Retail prices in Serbia have shown limited downward movement despite easing inflation pressures, reflecting deeper structural dynamics within the country’s supply chain and retail sector rather than short-term pricing decisions.
At the core of the issue is the balance of power between large retail chains and suppliers, which has shifted further in favour of dominant retailers. Major chains have responded to margin pressure by demanding lower input prices from suppliers and reducing product assortments, prioritising high-turnover and high-margin goods.
This strategy allows retailers to preserve profitability without significantly lowering shelf prices. Instead of passing cost reductions to consumers, savings are often absorbed within the supply chain, effectively stabilising margins rather than retail prices.
A key turning point came with the expiration of the government’s price margin cap (20%), which had been in place from September 2025 to March 2026 to curb inflation. Once the regulation ended, retailers regained full control over pricing strategies, reducing the immediate pressure to adjust prices downward.
In parallel, retailers increased various commercial fees and rebates charged to suppliers, further offsetting any need to cut final prices. This has intensified tensions across the supply chain, with producers effectively bearing part of the adjustment burden.
Another critical factor is weak competition and high market concentration. Large retail systems dominate distribution channels, and past investigations have even pointed to very similar pricing across major chains, suggesting limited price competition in practice.
From a macro perspective, inflation dynamics also play a role. While inflation has slowed, it remains positive and is expected to stabilise around ~4%, meaning there is no strong deflationary pressure that would naturally force prices down.
At the same time, consumer demand remains relatively resilient, supported by wage growth and credit expansion. In such an environment, retailers have little incentive to reduce prices aggressively, especially when volumes can be maintained without discounts.
Paradoxically, limited purchasing power acts as both a constraint and a stabiliser. While it prevents sharp price increases, it also discourages price cuts, as retailers aim to protect margins in a market where volume growth is uncertain.
In response to these structural imbalances, the government is moving toward tighter regulation. A new Law on Trade Practices aims to curb unfair practices, increase transparency, and rebalance relations between retailers and suppliers, including obligations such as daily price disclosure and stricter contract rules.
The persistence of high prices is therefore less about short-term inflation inertia and more about market structure, supply chain economics, and regulatory transition. Until competition intensifies or regulatory enforcement materially reshapes pricing behaviour, retail prices in Serbia are likely to remain “sticky downward”, adjusting slowly even when cost pressures ease.
