90% of Americans are concerned about food prices—more concerned than they are about gas prices—but what are they doing to save money at the grocery store? IGA CEO John Ross and the NielsenIQ team analyzed the latest inflation trends to see how they are really impacting shoppers and independent retailers during a June 29 webinar. Keep reading for key insights.
The current inflation scenario is far more complicated than it appears on the surface. Shopper behaviors continue to change, labor market shortages continue, and supply chain insecurities continue to affect inventory, all of which drive rising prices.
Laura Hansen, associate director of Nielsen Retail, has seen a huge amount of dollar growth in the market the last two years.
“We believe that's driven by price increases and inflation. We've seen double digit growth if we compare back to 2019 (pre-COVID)—still single digit growth versus a year ago, and we're really starting to see the unit sales flattened out. So that is an indicator that is really being driven by price,” Hansen said.
With the federal government predicting inflation around 7% and higher, Ross asked the NielsenIQ team what they are seeing in terms of the most accurate inflation numbers.
“It really depends on what your time horizon is,” NielsenIQ Vice President of North America Retail Jeff Ritchie said. “If you're looking at 52 weeks of data—June 4 versus a year ago—it's 5.3-5.4%. If you look at a much shorter window of time—the most recent 12 weeks or most recent four weeks—you're definitely at 8.5% versus a year ago, because you're looking at a very short window of time.”
What is the impact of the labor market?
Ritchie noted that a lot of people have left the workforce, whether it be out of frustration or even healthcare concerns because of the pandemic. And some households may be getting by with less.
“Q1 was our first quarter with negative GDP growth in a long time. About four weeks from now [June 29] we'll know Q2 GDP growth. I think if it comes in negative, we're truly in a recession because we'll have two consecutive quarters of negative GDP. That will help explain why you don't have laborers in the workforce: people are getting by with less.”
How are shopper behaviors changing?
As major events—like the pandemic or the war in Ukraine—cause dramatic shifts in the markets, analysts look for complex drivers to understand the change in shopper behavior based on segmentations.
NielsenIQ North America Vice President of Thought Leadership Carman Allison said their team has been tracking how customers have evolved and, as expected, household income is defining one's spending power. Allison said that 48% of households making less than $70,000 a year currently define themselves as “cautious spenders,” meaning they haven’t been financially impacted by these major events but are still careful with their spending. Meanwhile, 68% of that same income bracket are “strugglers" who have suffered financial insecurity and continue to do so today.
“81% of us are changing the way we shop in order to manage those expenses,” Allison said.
How are consumers saving money?
In changing the way they shop, consumers are implementing 4-5 strategies to save money, according to the NielsenIQ team. The top three strategies include:
- Stocking-up when on sale (50% of shoppers)
- Using coupons (42% of shoppers)
- Seeking out stores with lower prices (38% of shoppers)
“You could build a tactical business plan out of that list,” Ross said, encouraging independent retailers to use the above list to cater to customers. For example, with 37 percent of shoppers buying store brands more often, stores can stock more IGA Exclusive Brand private label products to help and appease customers. And with gas prices remaining high, many shoppers are reconsidering their local independent grocer as a one-stop shop, rather than driving an extra 5-10 minutes to save on a few center store items.
What about promotions?
NielsenIQ Vice President, North America Retail Analytics Arthur Dmitruk said they have continued to see the trend of fewer deals being offered in stores by manufacturing partners. He said compression and trade spend funding is still fueling that for many of the retailers that NielsenIQ serves.
“There's this push for localization, and that's an opportunity for retailers as they think about how to make more sophisticated decisions on collecting ROI. But now it's a necessity,” Dmitruk said. “And so, the localization piece has become just table stakes. Being able to find where there might be some margin opportunities and connecting between your base pricing and promotional pricing strategy has become essential.”
Supply chain insecurities reduced the number of promotions in the marketplace and as a consequence, the total number of items available to go on sale. Ross asked if the NielsenIQ team is seeing those kinds of numbers currently.
“There's some supply chain constraints hitting, you've got your unit numbers down 3 to 4%,” Ritchie said. “All of that equates to dollar growth on the top end, and unit shrinkage. So, we're pushing a lot fewer products across the shelf.”
Does IGA offer inflation resources?
The Independent Grocers Alliance has gathered resources from trusted, expert sources to help retailers plan for the future during this period of economic uncertainty. From demonstrating to shoppers that you're their partner in value through inflation-focused signage to detailed explanations on how inflation is impacting the grocery industry, we have you covered. Click here to visit our inflation resources page.
Did you miss Part I of this webinar series? Watch Don't Be A Victim To Inflation: Simple strategies to maintain price authority, increase sales, and drive shopper loyalty below.
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