Retail and Inflation: Shopper Behavior at the (New) Shelf

New study from EyeSee looks at pricing adjustments and consumer reaction
Eyesee Laura Hoste Headshot

As the world heads toward a recession, many retailers and brands that are facing inflation rely more than ever on research to forecast the impact on shopper behavior. A crucial question: How will consumers react toward drastically increased prices or reduced pack sizes on shelf? In uncertain times like these, when pricing sensitivity fluctuates and consumer confidence is unstable, relying on historical data is risky.

To help retailers and brands feel the consumer pulse today, EyeSee conducted a comprehensive study with nearly 4,000 U.S. respondents. The goal was not only to understand the current shopper sentiment, but also to forecast what happens to purchase behavior at the shelf when prices increase or pack sizes shrink. To allow for the flexibility of testing multiple scenarios in a short amount of time – testing in market takes time – the study was performed in an online virtual grocery store, a solution proven to have a strong correlation of 0.8 with real purchase behavior.

EyeSee zoomed in on a few high- and low-frequency categories: body wash, dishwashing detergent, bacon and chips. Below is an overview of the scenarios that were tested.

EyeSee Data
Figure 1: Several price/pack size scenarios were tested across four categories

Rethink 'Shrinkflation' and Volume Adjustments

A noticeable trend in the findings is that when prices increase in lower-frequency categories such as body wash and dish wash, shoppers clearly stick to their favorite brand but opt for a smaller pack.

This, however, doesn’t necessarily mean that retailers and brands should immediately start shrinking pack volumes. It can be a risky move in the long run, since shoppers might feel tricked if the change isn’t properly communicated. Only in two scenarios did we notice no change in shopper behavior with reduced pack sizes: when the packs shrink across the entire category or when the category doesn’t have obvious volume standards (e.g., dishwasher pods).

Although these items are considered essential, consumers can postpone purchases in low-frequency categories and search for better deals elsewhere, in case their favorite brands raise their prices. So, while it seems counterintuitive, now is the time to think about testing and widening the portfolio – from different pack sizes to entirely new products with added benefits – not only to intercept this delay in purchases, but also to truly understand what your shoppers need and how you can further support them.

Amp Up Private-Brand Communication and Innovation

Another question on many retailers’ minds is whether inflation will further accelerate private-brand share and penetration. The results from this first test show that private brands don’t tend to get purchased more often, even in the extreme price-increase scenarios (see the example in Figure 1 above).

EyeSee Figure 2
Figure 2: Shopper penetration across brands for low-frequency categories

We expect this to change over time if prices remain high, however. Therefore, now is the perfect time for retailers to plant the seed in shoppers’ minds and push for promotions, extra communication and innovation within private brands. Introducing a product’s "added value" through strong promotions and claims can nudge shoppers your way.

Lean Into the Purchasing Power of Indulgence

Even with high inflationary pressures affecting almost all aspects of everyday life, some categories are untouchable no matter how high the price gets. Bacon is one such category: The insights showed no sensitivity to price increases​ and no switching between brands, and the best-sellers remained the best, with some doing even better​!

When it comes to categories that are bought more frequently, like chips, we learned that shoppers are more inclined to search for cheaper alternatives when prices increase. So, in the case of chips, most shoppers are quick to jump to a different brand altogether, and since this category offers great brand and product variety, the item is easily replaced.

EyeSee Figure 3
Figure 3: Shopper penetration for leading chip brands

Since the options in this category are vast, having a wide range of products makes for a winning strategy, and this is where innovation comes in. It’s not enough just to observe the changes in consumer needs and react – it’s crucial to keep on innovating and developing new products that fit the transforming needs.

Note: These findings were from only the first wave of the study, and even though the respondents had just one shopping trip as a task, it’s evident that many new trends are already taking place even after a single trip. This study is ongoing, and EyeSee will continue to keep a finger on the consumer pulse over the next few months. For further results, please get in touch with EyeSee at [email protected].

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