Senior Director, Product Management
With inflation at record levels, consumers are rethinking how they spend their money.
As far back as July 2021, surveys showed that consumers were adjusting their purchasing behaviors based on rising inflation. At the time, inflation was at 5.4%. According to the U.S. Bureau of Labor Statistics‘ most recent report on inflation, March 2022 ended at 8.5%, which is the highest since 1981.
Every product category is impacted differently, both from an inflation rate perspective, as well as how consumers perceive changes. According to a survey conducted by Ipsos in January 2022, customers felt the largest increase in Grocery and Gasoline. Consumers were spot on with both of these categories as groceries are up 7.4% and gas has increased by 40%. Although the inflation rate on new vehicles is outpacing groceries up by 12.4%, it is unsurprising that this would not be top of mind for most consumers since it is a much less frequent purchase.
From the perspective of retailers, what does this mean for them? How can they be both strategic with margins and customer satisfaction?
For this answer, we look to the changes consumers plan to make to account for the higher prices.
The top three adjustments consumers plan to make in response to inflation are looking for products on promotion (42%), looking for lower priced items (35%) and buying private label (26%). While each of those changes will have an impact on retailers, there is opportunity for optimization to adjust assortment, pricing, and promotion strategies in anticipation to this behavior shift.
In a stable economic environment, it is already challenging to identify the most profitable pricing and promotion strategies that align with customer expectations. Add in inflation and there are meaningful challenges.
Here are a few options retailers have to manage margins and maintain customer satisfaction:
Inflation has impacted both consumers and retailers and is expected to maintain through at least the end of 2022. Consumers are able to adjust their spending habits to account for inflation and retailers should be evaluating their options as well. Looking at what consumers have reported as their likely responses, retailers will need to take action to optimize their pricing and promotion through this time to ensure continued customer loyalty.
As Senior Director of Product Management for Cognira’s AI solutions in Fashion lifecycle planning, Meg Galgano brings 20 years of retail experience. She discovered her love of retail working in stores and transitioned to analytical corporate roles, with a focus on forecasting and inventory. She has held leadership roles at Carter’s, Old Navy, and West Elm.
In her free time, Meg loves to paint and do just about any type of art (but that doesn’t mean she is good at it!) and enjoys roaming the metro Atlanta area with her husband and rescue dogs, Hula and Bean Sprout.
Key Term | Inflation
Inflation aims to measure the overall impact of price changes for a diversified set of products and services, and allows for a single value representation of the increase in the price level of goods and services in an economy over a period of time.
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