Courtesy of Victor García
With inflation near a four-decade high, American shoppers are watching their pennies and adjusting their spending habits — and the companies that supply them are taking notice.
The shift in spending is affecting retailers across the country, from giants like Walmart to the corner supermarket, as they look for ways to provide more affordable products to their customers.
Here are four examples of what businesses across America are seeing and how they are adapting to the new shopping reality.
The family supermarket that offers promotions on gasoline
Tom Charley’s family has been selling groceries in the Pittsburgh area for four generations, through many economic ups and downs. Even his father, who ran stores during the high inflation of the 1970s and 1980s, never experienced such a period.
“It’s a challenge, for sure. There’s no doubt about it,” says Tom Charley.
All three Charley Family Shop N Save markets have long prided themselves on their high quality service, with in-store butchers and bakeries. But today, advertisements in the company’s newspapers are more likely to highlight discounts on yogurt than premium hand-cut steaks.
“We’re as focused today as ever on price and making sure we can get items that people care about at the best price possible,” Charley said.
That means beating the bushes for lower prices on everything from bananas to the plastic wrap used to wrap prepared foods. Even though shoppers are trying to save money, Charley says, they still want the ease that comes with pre-cut vegetables or homemade kebabs.
“Convenience is king,” Charley says. “They want more and more every day.”
Courtesy of Tom Charley
It’s labor-intensive for the supermarkets, which employ more than 200 people. But they still need to be cost-competitive, especially now, when grocery store prices are climbing at a double-digit annual rate.
“We never said we were going to be the cheapest,” Charley says. “And we never said we were going to be the Whole Foods of the market either.”
Charley’s supermarkets get a lot of benefit from offering a gas station discount through a promotional link with Sunoco. Customers save 10 cents per gallon on gas for every $50 they spend on groceries.
“Our customers love this promotion,” says Charley. “Everyone I know in the shops at my store uses it.”
Cheaper Train Sets and Hunting for Used Models
The Smoke Stack Hobby Shop in Lancaster, Ohio sells trains, radio-controlled cars, and model airplanes. Sales skyrocketed at the start of the pandemic as many people looked for ways to entertain themselves at home. But some of the more elaborate model kits, priced at $70 or more, are now out of reach for some customers.
“Once you’ve hit the $50 mark, someone has to think long and hard before buying a kit like that,” says Patti Riordan, who runs the store with her husband, Don. “So we’re still going to get some of those high-end, but it’s definitely going to be a lot less.”
Instead, Riordan stocks more mid-priced models, which sell for around $35. And a growing share of his sales now come from second-hand items that another hobbyist has sold or traded.
“We buy a lot of collections so people can buy a model kit or rolling stock for their train setup at a fraction of the cost of new,” Riordan says. “And that’s been a great support for people this year.”
Don Riordan / Courtesy of Patti Riordan
Riordan says finding and appraising used hobby items is a lot of work, but it’s rewarding to see old wagons or other items find new owners.
“It’s a great way to recycle this stuff,” says Riordan. “It really allows a lot more flexibility to run the store. And that, I think, gives us the strength to get through some of these things.”
Ice cream in smaller portions – and at lower prices
Victor Garcia runs a Mexican-style ice cream business in the Fort Worth area, specializing in flavors like mango, tres leches and tequila.
“Our whole mission is to make people happy by sharing a piece of our Mexican culture,” he says.
This summer, Garcia noticed that some customers at its SolDias stores were reducing their orders, perhaps buying just one item instead of two. The average transaction went from $13.50 to around $12.25.
“That kind of was the first indicator that maybe a recession is coming,” Garcia says. “And we need to be a little more flexible with our budget-conscious consumers.”
Courtesy of Victor García
Garcia started offering smaller portions at lower prices. It is also researching cheaper paper suppliers and exploring whether it could cut costs by moving more of the ice cream-making process in-house.
“At the end of the day, what we don’t want are customers saying, ‘This place is out of our budget,'” Garcia said. “It’s up to us as companies to really listen and pivot and give the customer the experience they want.”
More hot dog sales, less deli meats at Walmart
Walmart reported a drop in quarterly earnings last week, saying cash-strapped shoppers dipped and filled their baskets with cheaper items as they became more sensitive to rising food prices.
“For example, instead of higher priced deli meats, customers are increasing their purchases of hot dogs and canned tuna or chicken,” says CFO John David Rainey.
Robyn Beck/AFP via Getty Images
Cash-strapped shoppers are also opting for more private label products over branded products. And in some cases, they have to make do with smaller packages.
Walmart says back-to-school sales have been strong so far. But customers are hesitant to spend outside the grocery aisle. This forced the retailer to offer deeper discounts on other merchandise as it tried to offload unwanted inventory.
At the same time, Walmart says it is seeing an increase in traffic from high-income shoppers, who are turning to the discount chain in search of bargains.