As Price Stickiness Remains, So Does Consumer Wariness
Inflation may be easing, but it’s not flat – and neither are consumers’ attitudes towards pricing.
A Feb. 12 survey conducted by Coresight Research found that four out of five consumers remain conscious of changes in pricing at retail, underscoring the fact that they are not only aware of costs but fluctuations at the point of sale. A fresh report from consulting firm Deloitte, meantime, reveals that about seven in 10 consumers are still concerned about rising prices for everyday purchases, not far off the percentage who felt that way during the time of record inflation in summer 2022.
[RELATED: Groundhog Day for Inflation?]
Realities at the point of sale are colliding with other factors related to the general volatility that continues to define the 2020s, according to Deloitte’s experts. "Despite low unemployment, GDP growth, and solid retail sales numbers, financial and geopolitical anxiety weigh heavily on the U.S. consumer's psyche. After navigating inflation for two-plus years, consumers' price expectations are moving slower than moderating inflation rates. Their intention to pull back on nondiscretionary items like groceries underscores the price fatigue and anxiety U.S. consumers feel,” said Stephen Rogers, managing director, Deloitte Consumer Industry Center, Deloitte Services, LP.
On that note, Deloitte’s research shows that spending intentions for groceries has remained flat since 2021, indicating changing behaviors. The company’s Food Frugality Index (FFI) found that consumers are navigating higher food prices by reducing at-home food waste (41%) and only buying essentials (31%). A number of consumers (28%) said that they are buying more store brands to rein in costs.
Companies need to address this still-cautionary behavior as elevated prices and general macroeconomic uncertainties are expected to linger. “Business leaders should adjust their strategies to help rekindle profitable loyalty and volumes,” Rogers declared.
As price remains a key – and likely sticky – driver, grocers can tackle pricing in different ways. Coresight, for its part, has published a new report on how retailers can leverage artificial intelligence (AI) to create optimal pricing plans based on consumer habits and a host of external factors. According to the report, conducted with partner Relex Solutions, AI and machine learning address limited flexibility in rule-based pricing, inaccurate inventory planning and increasing costs.
To effectively deploy these tools, Coresight's experts recommend a structured approach to AI-based pricing software. Among other suggestions, the firm’s analysts suggest the importance of having a clear pricing strategy, understanding data availability and actionability, overcoming the inertia of siloed operations and integrating technology across business functions. “Retailers that introduce pricing technologies with a long-term strategy stand to gain significantly moving forward. This clarity of long-term expectations is necessary for effectively scaling the technology and its interoperability with different yet correlated business functions,” they wrote.
