Why Grocers Might Need New Inflation Strategies
OPINION: EDITOR'S NOTE
A brand new study from data science firm dunnhumby has far-reaching implications for food retailers navigating the inflationary crisis hitting America.
The dunnhumby Consumer Pulse Survey found that U.S. consumers are now more worried about rising food prices, the economy and their own personal finances than they are about the pandemic, possibly a watershed moment since COVID-19 hit in March 2020. Perhaps most worrisome for grocers is that U.S. consumers said the food inflation rate now stands at 17.7%, when in actuality it stands at 7.5% according to U.S. Bureau of Labor Statistics. The reality of increasing food prices, coupled with the intense publicity around these increases, have led to a distorted perception among consumers. But perception is reality, so grocers will need to adjust their operational strategies to keep shoppers loyal and drive sales during what is expected to be an extended period of inflation.
According to dunnhumby, 51% of U.S. shoppers are concerned that their money doesn’t go as far as it used to due to rising prices, marking a 10 point increase since September 2021, and a 12 percent increase since May 2020. Eighty-three percent said food prices have gone up some and half say they have gone up by a lot. A majority of U.S. consumers (58%) believe the economy is weak, a three point increase from September 2021, and the same percentage from February 2021. And 40% of consumers continue to report their own finances are weak.
Interestingly, online shopping numbers are essentially flat from where they were in May 2020, dunnhumby said. Consumers reported they make an average of one trip per week using click-and-collect, making that channel as popular as delivery. Only 39% of U.S. consumers surveyed are satisfied with the in-store shopping experience, a 3% drop since September 2021.
In the study, Walmart (which reported a stellar fourth quarter of sales growth in February) was cited for providing the best value for the money by 54% of respondents, an increase of 25 points from September 2021. Aldi (18%), Kroger (10%) and Amazon (10%) finished in the top three for best value.
According to the study, the top value-seeking behaviors among consumers were: I am shopping at stores with the lowest prices (50%); I use coupons/offers on products I regularly buy (39%); I stock up on products when on sale (36%); I search online for the best sales (33%); I buy own label when available (32%); I make a list and only buy what’s on it (31%); some products I only buy when on sale or have a coupon (30%); I buy larger pack sizes (27%); and I compare prices to decided where to shop (24%).
With inflation expected to intensify even further this year, grocery retailers should be ramping up their differentiation tactics when it comes to value. Not just on price but helping shoppers reimagine how to stretch their food dollars. Some strategies could include expanding private brand promotions across categories, leveraging social media to help shoppers re-create restaurant recipes at home for less cash, promoting omnichannel offerings as a way to remind shoppers that shopping online helps them stick to their shopping lists and save money, expanding larger pack size SKUs (many consumers are still pantry loading), or marketing recipes that help shoppers make multiple meals using leftovers.
These strategies should help food retailers maintain their value propositions during a(nother) historic crisis.
