As inflation causes consumers to cut back on spending, grocery shopping seems to be on the rise.
As more consumers cut back on unnecessary purchases, the supermarket’s value proposition – meeting consumers’ essential daily food needs at much lower prices than restaurants – is all the more attractive to cash-strapped customers.
Research from PYMNTS’ latest Digital Divide research series, “2022’s Digital Divide: Restaurant Customers Respond to Rising Costs, Declining Service,” based on a survey of 2,378 US restaurant consumers, found that a third of all diners buy. from restaurants a little.
At the same time, inflation has also caused consumers to shift more of their money to shopping, instead of just spending on food. Sixty-one percent of consumers bought almost exclusively everyday essentials such as gas, health products and food in March, according to the April edition of PYMNTS’ ConnectedEconomy Monthly Report, based on a survey of about 2,500 American consumers. Since then, inflation has only increased, causing many consumers to stick to the basics.
Bring us Figgy Pudding
Groceries were also a big hit this holiday season. Where in previous years when the necessary gifts and the most needed human gadgets were at the top of the shopping list of consumers, in 2022, the high cost of food has found little slack left, making the habit, or the need, to give away groceries a reality for many families who buy only the essentials.
The data supports the idea that food – not the usual stuff – is where people’s hearts and wallets are focused this year. The study “New Reality Check: The Paycheck-to-Paycheck Report: Holiday Shopping Edition,” a collaboration of PYMNTS and LendingClub, found that the 15 million Americans who bought holiday gifts last year are still gift-free in 2022.
Where they cut down heavily on holiday food.
“Only 17% of consumers expect to spend less on groceries than in 2021, although 26% of grocery shoppers plan to spend less on retail purchases in 2022,” the study said. “Consumers are likely to spend less on restaurants this year, with 29% of respondents saying they will cut back on such spending, followed by entertainment and leisure, with 27% planning to cut back.”
The survey also found that a staggering 81% of consumers surveyed said they plan to spend as much or more this year than last on purchases, while forecasts for non-essential spending remain depressed.
Food and Finance
Even the biggest retailers, including both Walmart and Target last month, reported that groceries or other so-called essential items continue to lead the pack when it comes to bringing people to their stores and their websites.
Christina Hennington, senior vice president and chief growth officer at Target, said on Nov. 17 that for all demographics, one of the “tipping points” in consumer-retailer engagement is “the amount at which they purchase food and beverage.”
At Walmart, Chief Financial Officer John Rainey told investors and analysts that the retailer is “well-positioned to serve customers and achieve greater travel frequency during tough economic times, and we have more tools to do that this cycle,” Rainey added. “For example, we’ve continued to gain market share in household grocery by income demographics, with nearly three-quarters of the revenue coming from those over $100,000 in annual income.”
Some major food players are using loyalty to add value to grocery shoppers this season. International grocer Ahold Delhaize said in early November that its loyalty programs generated more than $1.5 billion in grocery sales by 2022 at its United States properties, which include Food Lion, FreshDirect and Giant Food.
Supermarket leader Kroger also said last week that food price concerns are causing more customers to shop in stores as they find it easier to look for items on sale compared to the Internet.
“We know that the most price-sensitive customers are those who have a low relationship with eCommerce and are low on the acquisition curve, and those are the customers who are most likely to walk into a store,” Barbara Connors, vice president of trade data at 84.51°, the grocery giant’s marketing data service, told PYMNTS. “And one of the reasons is because they want sales, deals and coupons…”