Learning to navigate consumer moods on inflation
Inflation is at a 40-year high and consumers have less confidence to spend than in recent memory, according to a new First Insight report, The State of Consumer Spending: Inflation Impacting Consumer Confidence. The report revealed that 97 percent of consumers are reprioritizing how they spend.
Leading the discretionary expenditures cuts, dining out ranked highest with 42 percent of consumers reducing their restaurant spend. Logically, grocery remains the highest priority; however, grocery is not immune. Eighty-seven percent of respondents say that they are cutting back on groceries, and 41 percent said that they will save money by cutting back on purchasing name brand products. Twenty percent will cut back on produce while 26 percent will buy fewer organic products.
Inflation is also affecting the way consumers shop, with 42 percent saying that they are now shopping for deals, i.e. sales. Forty percent are now staying within a budget, 28 percent say they are buying less overall, 25 percent are shopping more online and 25 percent are shopping bulk stores or using warehouse retailers. Overall, 82 percent of consumers are searching for less expensive ways to shop due to inflation.
“With inflation at 8.5 percent, rising prices will continue to impact all businesses for the foreseeable future,” said Greg Petro, CEO of First Insight. “This data indicates that many industries, which had hoped for a post-pandemic rebound in 2022, specifically Hospitality, Travel and Entertainment, may be faced with yet another difficult year. Furthermore, categories that saw an increase in spending during the pandemic, such as jewelry, automotive, premium groceries and apparel, will most likely see a contraction in consumer spending for the next several months. Companies must work to get an immediate understanding of how consumers are going to change in the days and weeks ahead by engaging with them directly to anticipate and respond.”
Further affecting spending is the fact that consumers believe inflation isn’t going anywhere anytime soon. Twenty-four percent believe inflation will last from six months to one year, 23 percent more than two years, 21 percent 18 months to two years and 20 percent 12 to 18 months. Only 12 percent believe inflation will last less than six months.