dunnhumby Consumer Trends Tracker
By Robert Hayes,
3 November '22A soaring perception of food Inflation is driving critical shifts in consumer behavior across America
Now, more than ever, shoppers are looking to save money on their grocery shops. This article examines the customer needs, attitudes, and behaviors in the current high inflation climate.
The perceived rate of food inflation among US shoppers surveyed for this report was 22.8% in July 2022, up 0.8% from April/May this year. Despite perception being higher than the actual rate in July of 13.1%, the impact of soaring food prices is very real. And the recently reported Consumer Price Index (CPI) for August shows that food inflation went up 0.8 % since July, dampening hopes that inflation was coming under control. We also found that consumers who reported they would have difficulty covering an unexpected expense of $400 rose from 60% in April/May this year to 64% in July. Financial insecurity leads to food insecurity, with nearly one in three households having skipped or cut the size of their meals in the last 12 months because there wasn’t enough money for food.
In these uncertain times, three in four shoppers express a need for consistent prices, and low base prices remain as important as ever, even among more affluent shoppers. For households with income above $100K, the importance of low base prices rose 7% from April/May to July this year. While higher income households buy in bulk to spend efficiently, this option is not available to lower income households who need to buy small-pack sizes to keep spending low. Yet despite all the financial pressure, the “lipstick effect” often noted in recessions appears to have kicked in, with a 3% rise in premium or luxury items from the grocery store likely substituting more expensive luxuries.
In this report, we will look at a number of consumer coping mechanisms for real and perceived inflationary pressures:
- Money-saving behaviors – shopping around, checking prices online, swapping to private brands, and engaging with loyalty schemes have all risen since April/May this year. Young families are most likely to exhibit these money-saving behaviors as they struggle to keep household spending under control.
- Where to shop – Dollar stores have seen a 2% increase in share of wallet, at the expense of specialty stores.
- What to buy – 83% of shoppers report looking for cheaper alternatives to the products they usually buy in at least one category. This trade down behavior is most likely to occur in packaged food and common household products. It is closely correlated to the importance of price in that category, but notable exceptions such as beverages and pharmacy suggest strong branding can withstand customer trade down.
The dunnhumby Consumer Trends Tracker is included as part of The dunnhumby Quarterly: Inflation Edition, a new strategic analysis of the key grocery themes in times of economic uncertainty. This edition unites inflation-related insights from economic trends, Customer needs, competitive positioning of the 70 largest retailers in the U.S. grocery market, and the perspectives of our battle tested grocery industry consultants.
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