Will American consumers push back against higher grocery prices?
U.S. grocery shoppers are cautiously anticipating a return to normality as the rollout of COVID-19 vaccines continues. Experts say, however, that consumers may have a long wait before seeing an ease in pandemic-era price hikes.
Prices have undergone a 2.6 percent increase in the past year with a 0.6 percent increase in March alone (the largest in a decade), according to Bureau of Labor Statistics findings reported by NBC News. In grocery, fruit and vegetable prices have increased by two percent and the price of meat, poultry, fish and eggs has increased 0.4 percent since February. Economists believe that prices will continue trending upward as the year continues. Some factors suspected to be responsible for the price increases are:
- Vendors cutting back on promotions and coupons in the wake of last year’s early-pandemic hoarding;
- Rising gas and commodity prices;
- Increased imports by China;
- Crop damage in the Midwest;
- Supply chain inefficiencies created by the pandemic.
In other recent times of economic upheaval in the U.S., high prices and low wages pushed customers to dollar stores and budget grocers.
The aftermath of the 2008 economic downturn brought the ascendance of the dollar channel, as a broader swath of shoppers across income levels became more budget conscious and began visiting these stores.
By 2017, Business Insider referred to the ongoing growth of the dollar store segment in the U.S. as representing retailers making a bet on the existence of a permanent underclass in the country.
The relative economic stability of the immediate pre-pandemic years led to changes in the dollar store and discount grocery channels. Budget grocer Aldi, for instance, underwent a revamp, upgrading its fresh/organic offerings and in-store shopping experience. Dollar General has launched two high-end store concepts, most recently introducing one called popshelf that caters to more affluent women.
While the current round of price increases may merely inspire more careful budget management techniques in some demographics, there is a concern that these increases could be significant enough to cause dangerous food insecurity for others, according to NBC News. The increases come at a point when more than nine million people are unemployed, compounding the concern.
- Get ready for higher grocery bills for the rest of the year – NBC News
- Nielsen: Dollar Stores Not Just for Low-Income Shoppers Anymore – RetailWire
- Dollar General bets on the death of the middle class – RetailWire
- Are Aldi’s upscale makeovers necessary? – RetailWire
- Will Dollar General win over higher income consumers with its new store concept? – RetailWire
DISCUSSION QUESTIONS: How should grocers address higher prices with their customers? What will higher prices mean for competition between the various types of retailers that are vying for grocery sales?