What Will Impact Grocery in 2023

Jan 4, 2023

As we begin 2023, it is amazing to think how strange the last few years have been. Decades from now experts will talk about the long-term effect of a global pandemic on literally everything. And young people won’t be referred to as Gen Z, but the Pandemic Generation. (I actually prefer the term “Covidian”).

But looking back doesn’t help us manage our businesses now and next year. So, what’s next in 2023? I have put together predictions on key areas that impact the independent grocery industry: inflation and the economy; labor market; housing; shopper behavior.

Inflation & the Economy

The old economic models suggest that when interest rates rise, inflation slows. The Federal Reserve here in the U.S., and their equivalent in many our IGA countries across the globe is running that play, but it is hard to see much impact. Inflation continues to accelerate, albeit more slowly, but we are in some sort of strange economic surrealism: rising costs aren’t slowing consumer spending, luxury goods retailers still have lines to get into their boutiques, and airline travel has never been busier. Black Friday holiday spending set new records, with over $9.12 billion spent in the U.S. on Friday, November 25, 2023 and nearly half of that made via smartphones.

I predict the “times are good/times are bad” phenomenon will be short lived. Mounting consumer credit card debt (up 15% versus a year ago) and rising goods prices will eventually collide. Only when consumers slow purchases will inflation begin to reverse, no matter what the Fed does with interest rates.

And when that happens, expect lower income and marginal middle consumers to be hit the hardest. The poor seem to always pay the most for everything and the combination of high prices, soaring housing costs, and rising debt service will push more Americans out of the middle class.

Labor Markets

Many people thought that when the artificial stimulus injections issued in the first two years of the pandemic ran out, workers would flock back. It didn’t happen. Economists think that rising inflation will force workers back, but that hasn’t happened either.

Businesses need to stop wishful thinking and sign up for the new normal of the modern labor market. We had problems finding service workers before COVID began, and we will continue to struggle long after the last mask is thrown away because the job market itself has changed.

Today’s workers have choices they never had before – 36% of employed Americans identify as freelancers. The gig economy – featuring employers like Uber, Lyft, Door Dash, and thousands of others – has permanently changed the landscape for traditional employers.

In 2023, the gig economy in the U.S. will hit $455 billion, with 78 million people who used to apply for warehouse, restaurant, and retail jobs opting for flexible work options.

The number one reason workers flee service jobs? It isn’t money! They want more flexibility in their work life. Young people especially are prioritizing work-life balance than ever before. We must stop thinking that when the economy stabilizes and inflation and out-of-stocks return to normal that workers will quit their gig economy jobs and hop back into our stores. Instead we must focus on how we can modernize our jobs to appeal to what workers truly want.


America has a housing crisis – there aren’t enough homes to meet demand. In a way, this is good as it means our total population is growing. (When population growth stops, economic chaos follows, as we see in Japan, Western Europe, and increasingly in China.)

But the bad part is that young families and low-income Americans are increasingly being left out of the housing marketplace. And when home ownership declines, it causes rents to increase. The Fed has been pushing higher interest rates to slow inflation, but instead of helping it is hurting those who need help the most.

Over the long run this will push out the definition of suburbia, as more affordable housing is built farther and farther from the city center. Meanwhile urban centers are being refurbished and gentrified, pushing low-income families out, and centralizing younger, white-collar wealth.

Over the short run, the squeeze between high housing costs and high inflation will tip more Americans into economic crisis, especially two-income working families already struggling to stay “above water.”

Shopper Behavior

So far, consumer spending has been remarkably unfazed by the massive economic, social, and political upheaval of the last few years. People have continued to spend and spend, and as 2022 Black Friday shows, they are continuing to spend.

But reality is coming, and I predict it will come quickly. Stimulus checks are spent, credit card debt is up, and the cost of everything is rising. I would predict massive consumer purchase rationalizing in the back half of next year.

The good news for the food industry is that, amongst all the things Americans spend their money on, quality food and nutrition is the least likely category to get cut. It isn’t just because everyone has to eat; instead, it is the ongoing connection between food and health that makes so many consumers prioritize quality of ingredients, farm to table, organic, and so many other attributes. And as our country (and most countries worldwide) ages, this desire to be healthier by eating healthier will accelerate.

That is good news for the food industry, but only if we modernize how we sell. Shoppers might switch out of name brands and go to private label in one area, but still buy fresh produce and hand ground meat in another. As grocers we need to understand this need. If we can help them to save money without nutritional compromise, we could navigate the tough waters ahead and come out with higher market share and more loyal shoppers.

China's COVID Crisis

In much of the world, the global pandemic seems to be a fading memory. But until recently, China held onto its strict lock down protocols that included rolling shutdowns, restricted travel policies, and other extreme outbreak containment methods. With those protocols rolled back, the country has seen a massive outbreak due to lack of hybrid immunity, vaccine hesitancy in the elderly, and concerns over the effectiveness of their vaccines. Since China is such a critical part of the manufacturing process for what seems like everything, everywhere, it is important for grocers to know why this change now, and what would it mean in the short run.

The why now is simple: China’s GDP growth was half of what the country hoped. Every border closure, every provincial shutdown has caused a ripple effect of economic mayhem, and we have been living that in supply chain disruption for the past three years.

But it is also a competitive risk for the country. If international companies can’t find reliable supply of parts and finished goods, they will seek other suppliers. And once supply lines reconnect, it is expensive to earn those customers back. Already new manufacturing supplies for everything from computer chips to plastic bottle tops have been opening up in other countries throughout Asia, South America, and other developed nations.

For our IGA families and customers in China, I wish them absolute best as they deal with ongoing COVID infections. For the world economic stage, COVID may have broadened and strengthened the global supply chains. In the future, cost, availability and reliability will be determining factors for how goods are sourced and in the long run, that is probably good for all of us.

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