Grocery Shoppers Cut Back, Trade Down as Inflation Rises

As consumers look to mitigate the effects of skyrocketing food inflation on their bank accounts, how they shop for groceries is changing.

Research from the latest edition of PYMNTS’ Consumer Inflation Sentiment study Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy,” which draws from an August survey of 2,169 consumers, finds that 62% plan to cut down on unnecessary grocery expenses, up from 60% the month before. Similarly, 70% are paring back nonessential retail spending.

And retailers have been rethinking their inventory as a result. Take Target, for instance, which announced back in June a plan of action for tackling supply chain complications and improving its inventory difficulties, which involves offloading many items while prioritizing high-performing food and beverage items.

Related news: Following Walmart’s Lead, Target Taps Grocery to Drive Traffic

Similarly, 48% of consumers have switched to cheaper merchants, up from 45% the month before. This shift certainly benefits larger grocers, those that have the ability to price out competitors.

“As our customers continue to deal with high inflation, our value proposition is resonating with them,” Rodney McMullen, chairman and CEO of Kroger, the largest pure-play grocer in the U.S., told analysts on a call Friday (Sept. 9).

Only 14% of those surveyed reported that they had not made any changes to their grocery shopping behaviors in response to rising prices, down two points from the 16% that said the same the previous month.

The fact that 86% of consumers have made these changes makes sense, given the extent to which grocery price increases are outpacing inflation overall. July’s Consumer Price Index for All Urban Consumers (CPI-U) data, reported by the U.S. Bureau of Labor Statistics (BLS) last month, noted that food at home (i.e., grocery) prices increased 13.1% year over year, well above the 8.5% increase for all items. Similarly, food at home prices rose 1.3% month over month, while prices for all items held constant in the same period.

See also: Membership Program, Automation Recharge Kroger’s Digital Growth

But even pricier grocers may find their bottom lines insulated — as even these tend to be significantly more affordable than restaurants. Consequently, they may benefit from trading down from away-from-home dining. In fact, 78% of consumers reported that they have been eating at home more in response to inflation.

This trend mirrors the way that many restaurants are protected from feeling the effects of trade down too acutely by the influx of customers who may have previously gone to more expensive ones.

“If you’re in the low- to mid-end of restaurant expense, you’re going to see some trade down where higher-end people are going to come to you, but you’re going to lose some to grocery,” Paytronix CEO Andrew Robbins told PYMNTS’ Karen Webster in a July interview “So, you’re going to be fine, net-net, but you’ll see some shifting of people in the trade-down process.”

Read more: This Week in Payments: Inflation Drives Shift in Customer Mix for Restaurants as Consumers Trade Down