How This Economic Climate Is Different for Grocers
When it comes to economic conditions and consumers’ penchant to rein in spending, it’s back to the future in some ways and a whole new future in other ways. A new report from Coresight Research, with analysis from FMI – The Food Industry Association, examined previous recessions and analyzed today’s market climate to offer suggestions for food retailers navigating a landscape dotted with potential roadblocks.
According to the report, “U.S. Grocery Retail and Recessions: Learnings from the Past and Recommendations for the Future,” the grocery sector proved resilient during the initial phase of past recessions in 2001 and 2008-09 , especially when compared to the restaurant industry, but slowed down in the ensuing year when the reality of an economic downturn hit more parts of the consumer base. FMI's grocery shopper trends report in 2009 found that 18% of shoppers were buying only what was on their list, versus 12% in 2007.
[Read more: "Majority of Americans Want Quick, Convenient Meals"]
As economic conditions remain volatile now, more than a year into high inflation and actions by the Fed to increase interest rates, Coresight’s researchers pointed out that the food retailing market is different than in past recessions, with more value, dollar and outlet chains and the option of e-commerce. Generational changes are also set to shape this latest bout with uncertainty as Millennials are in their peak family life stage and are used to more choices for their food dollar. As the report notes, “The current economic challenges reflect an unusual confluence of a number of forces, whereas prior recessions tended to see one dominant factor.”
What does this complexity mean to grocers trying to remain competitive and provide shoppers with value? The Coresight reports shares a number of suggestions, including broad-scale steps like focusing on retaining long-term market share and building value perceptions through pricing, and tactical measures like providing consumers with alternatives to dining away from home, touting smaller indulgences, leveraging loyalty programs, expanding private label offerings and looking into margin-enhancing opportunities like retail media.
Grocers can also utilize their ESG pledges and actions as they contend with a challenging and different economy than in the past. Social responsibility, for example, can buoy loyalty, as grocers help improve food security and meet consumers’ nutritional needs. In addition, food retailers can support food systems by taking concrete steps to curb waste, the report concludes.
