Consumers are dynamic not static and you must evolve as fast as your consumers or your food retail company will lose customer relevance according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.
If you are not focused at the intersection consumers, evolving food path to purchase, you are most likely missing out. This year regular readers of this blog know that consumers are cutting back and changing their purchase priorities as economic pressures increase.
It is at the intersection the combination of rising prices, increased costs of living and ongoing social discontent prompted by the never-ending threats of the tri-demic (flu, COVID-19, RSV) has resulted in financial problems for many consumers. The consumer price index hit 9% in June, a level unseen since the early 1980s, an era before such industry sectors as fast casual and before chains like Chipotle Mexican Grill were even a dream. Gas prices over the summer hit an average of $5 a gallon, a record. The level of inflation influenced consumer behavior and challenged operators, almost none of whom had experienced an operating environment quite like it.
Restaurants raised menu prices at record levels and, even as inflation eased into November, were still raising prices at an 8.5% clip. Yet, with their own costs for food, paper and wages up in the double digits, their margins still thinned.
1. Change in priorities — Consumers are adjusting their spending habits and lifestyle behaviors in response to increased pressure on household budgets and ongoing concerns regarding a recession. Additionally, pandemic-prompted social disruption has pushed consumers to make mental and physical health their top priorities. Financial security is another important factor, which results in more restricted spending.
2. Reduced discretionary spending — At the start of 2022, consumers surveyed by NielsenIQ planned to cut back on mini-splurges like dining out, gym memberships and away-from-home entertainment, focusing instead on the day-to-day essentials and prioritizing basic needs and necessities like utilities and groceries. These consumers plan to further tighten their belts as inflationary pressures continue to increase, resulting in greater cutbacks on food deliveries and other indulgences that they can instead enjoy at home.
The last time a significant decline in discretionary spending occurred was in 2020 during the initial months of the pandemic. Economic uncertainty is again causing consumers to adjust their behaviors across all aspects of life, from shopping to entertainment to maintaining a healthy lifestyle.
3. Staying at home — Lifestyle trends that increased in popularity during the pandemic are again rising in favor. These include food preparation and dining at home (cited by 44 percent of surveyed consumers), spending less on clothes and grooming (37 percent) and cutting back on treats like dining out (34 percent) and vacations (24 percent).
4. Selective shopping — In addition to being more mindful of how much they spend and what to prioritize, consumers are shopping differently. They intend to combat inflation by embracing a selective mindset.
Accordingly, many consumers are switching to buying lower-quality items and shopping more often at discount stores or traditional trade outlets. Brand loyalty has lessened, with 31 percent of consumers admitting to buying whatever is promoted; 27 percent buy whatever is cheapest; and 26 percent stop purchasing certain categories entirely.
5. Private label preferences — Private label brands have a stronger opportunity as consumers shift their loyalties and make trade-offs. Alternate products that offer quality at a lower price provide greater appeal, with 20 percent of consumers saying they will opt for a private label to help manage their grocery expenses. In the United States, private label growth is prevalent in categories such as baking goods, health and beauty, dairy, household products and deli foods.
As consumers seek ways to cut back on spending while saving for the future, retailers and suppliers will have opportunities to manage pricing across portfolios as they seek to retain customers.
Success does leave clues. One clue that time and time again continues to resurface is “the consumer is dynamic not static”. Regular readers of this blog know that is the common refrain of Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®. Our Grocerant Guru® can help your company edify your brand with relevance. Call 253-759-7869 for more information.