Price inflation has hit consumers and all food channels hard.

It’ a problem measured not just in dollars and cents, but in perceptions, expectations and communication — or the lack thereof.

Retailers who figure out not only how to ease sticker shock for shoppers, but also to let them know they’re on their side, stand much to gain.

“There’s a significant information gap between supermarkets and shoppers,” said Brian Numainville, principal of market analyst the Retail Feedback Group. “It’s evident that there is a need for enhanced communication and support during these economically challenging times.”

The Retail Feedback Group recently completed research on this very topic.

What the firm found is that when shoppers were asked to rate whether their primary supermarket is on their side when it comes to inflation, and if their store is good at communicating why product prices have risen in the past few years, they said stores have work to do. 

In both cases, on a 5-point “agreement scale,” shoppers gave supermarkets relatively low scores of 3.23 and 3.01, respectively.

“Clearly shoppers believe supermarkets could do more in terms of supporting them when it comes to fighting inflation, as well as communicating why product prices have increased,” Numainville said. “This is especially important in light of the inaccurate profit perception we continue to find in our research.”

By “inaccurate profit perception,” Numainville means the commonly held belief among consumers that retailers are making far more in profit than they actually are.

According to the Retail Feedback Group survey, shoppers believe their primary grocery store has a net profit of 31%.

That’s actually slightly lower than results from the past two years. But it’s miles away from the actual net profits of most supermarkets, which has been close to 1% historically, according to FMI – The Food Industry Association.

Given the consumer misunderstanding of the true profitability of supermarkets, and the fact that 93% of shoppers are using inflation-coping strategies, it isn’t surprising, Numainville said, that shoppers expect supermarkets to do more in helping them deal with food price inflation.

Some of the top strategies shoppers are using to combat food price inflation — buying more items on sale (65% using), buying more store brands instead of national brands (49%), and using a store’s weekly sales flyer to plan a shopping list — are all techniques that supermarkets can directly and proactively use to communicate how they’re doing as much as possible to help shoppers, he added.

“Given the increase in nearly all food price inflation coping strategies year-over-year, consumers continue to look for ways to save money in the face of food price inflation. So clearly, they believe this challenge will continue into the foreseeable future. It’s in the best interest of supermarket retailers to find ways to continue to listen to shoppers, communicate better, and increase transparency and trust.”

Consumer perception

The Retail Feedback Group study also tracked the top factors consumers cited as reasons for higher prices at the supermarket.

At the top of the list was government policies and actions, with a score of 3.86 on a scale of 5.

Other groups or other factors, in order, included:

• Product manufacturers and suppliers (3.75);
• Wars and worldwide political conflicts (3.42);
• Supermarket retailers (3.40); and
• Labor supply shortages (3.23).

Factors viewed as least responsible were climate change factors (2.85) and farmers and growers (2.78).

“In this politically charged environment, supermarket shoppers believe that government policies are the leading influence on higher supermarket prices,” said Doug Madenberg, chief listening officer of The Feedback Group. “More holistically, what emerges is a picture of multiple factors that the average consumer navigates, all contributing in various degrees to the price tag they face at the checkout.”

Swapping out 

Consumers have fought inflation by substituting less expensive versions of some of their favorite products, Leo Feler, chief economist for Numerator, a data insights firm, said in a recent FMI – The Food Industry Association webinar.

And it doesn’t mean shoppers have to sacrifice fresh.

“Even though we might have things like canned fruits and vegetables that have become more expensive, we also have fresh vegetables that have become more affordable. We also have citrus fruits, apples, bananas, lettuce, potatoes that all have become more affordable.”

Despite affordability reaching near pre-pandemic levels on many fresh and other items, however, consumers still name grocery costs as one of their top concerns, according to FMI data.

Consumer spending on weekly groceries has reached an average of $165 per household, up from $121 in 2020, and shoppers are employing a variety of techniques to save money.

Over 50% of consumers report hunting for deals as a popular cost-cutting strategy, along with buying more private brands (41%), buying fewer items (32%) and buying in bulk (23%).

More shoppers also are comparing unit pricing, such as per ounce, between different grocery stores than previously. Gen Z and millennial shoppers are the most likely demographics to compare unit prices, with at least 70% of both groups comparing price points across products in a single store and across products between stores.

“Given the impact of inflation on food prices over the last few years, we’ve seen a shift in consumer behaviors to address these prices,” said Steve Markenson, vice president of research and insights at FMI. “Perhaps the biggest change we’ve seen is shoppers’ evolving notions of what constitutes value. While traditionally thought of as a straight price-to-quantity ratio, the notion of value among the modern grocery shopper is a much more nuanced matrix that combines convenience, experience, relevance and quality into the equation along with price and sheer volume.”

Lack of movement

This spring, neither consumers nor operators made major changes to their financial habits, according to the latest Table Stakes report from Datassential.

“Throughout the past month, none of the economic metrics we track for both consumers and operators have experienced any major movements. Over half of operators still expect higher traffic and sales level, and nearly 60% of consumers still expect their future finances to remain unchanged.”

More consumers are expressing hesitation around dining out than in previous months, but it’s unclear if this pattern will persist going forward, according to the report.

Inflation and labor costs remain the most pressing concerns for operators across all segments, and nearly half plan on spending the next month actively strategizing to reduce food costs.

As for consumers, while nearly 75% still express concerns around the lingering effects of inflation, only two in five are presently worried about international conflicts and crises — the lowest this figure has been since January 2024. 

Action plan: 4 ways for retailers to improve communications with shoppers

1.  Transparent pricing communications

Whenever there is a price increase, retailers could proactively inform their customers about the reasons behind it. This can be communicated at the point of sale, via signage in the appropriate department, or through digital channels, providing specifics such as increases in supplier costs or changes in supply chain dynamics.

2. Regular updates on market conditions 

Providing ongoing updates about market conditions that affect food prices, such as weather events impacting crop yields or geopolitical events affecting supply chains, can help consumers understand external factors influencing pricing.

3. Staff education

Enhance the training of in-store staff to better handle inquiries about prices and inflation, as well as better understand the true profitability of supermarkets. This direct engagement can help in managing perceptions and misinformation effectively. If employees don’t understand the situation, it will be hard for them to answer shopper questions.

4. Feedback & listening

Implement feedback tools for collecting and addressing consumer feedback. Understanding shopper sentiment can guide supermarkets in adjusting their communication strategies effectively.

Source: Retail Feedback Group 

This article is an excerpt from the June 2024 issue of Supermarket Perimeter. You can read the entire Inflation feature and more in the digital edition here.

Government policies & actions, along with product manufacturers and suppliers, were viewed as the most responsible for higher prices in supermarkets.

| Source: The Feedback Group

Supermarkets receive relatively low scores for supporting and communicating with shoppers about inflation. | Source: The Feedback Group