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SHOPPERS THINK WHAT?

Well, they think retail net profit is 33% and that food inflation is way more than it is. Here’s a look at what shoppers think and how you can fight these misperceptions.

Americans believe food-at-home inflation has hit 22.8% — 9.7 points higher than the 13.1% annual rate reported by the Bureau of Labor Statistics. That’s according to the latest dunnhumby Consumer Tracker, which also reports on some other consumer perceptions we ignore at our peril.  

Some 83% of shoppers say they are looking for cheaper alternatives in at least one category of products they buy, with packaged goods making up 53% and frozen foods at 42%.

‘PERCEPTION IS REALITY’

As the old saying goes, “perception is reality.” So buyers, retailers and manufacturers need to be aware of what shoppers think about retail prices throughout every category. Research from dunnhumby showed that 37% are checking prices online before heading out to do their weekly shopping. And 35% are buying in bulk in hopes of getting the best bang for their buck. Still others switch to retailers they think offer better value. What’s more, history has shown that when times get tough, shoppers buy more store brands — especially in the 35-44 age group.

Let’s drill down a bit deeper. Some 83% of shoppers say they are looking for cheaper alternatives in at least one category of products they buy, with packaged goods making up 53% and frozen foods following close behind with 42%. 

So if perception is reality, what can retailers and manufacturers do to fight this? It’ll vary by retailer, of course. Whole Foods will need to deal with this differently than a dollar store would. They will need to reinforce why organic and natural items are truly worth more than shoppers paid for them last week. Signage stressing the importance of healthy eating is a good investment. Can the product mix be tweaked to help with sticker shock? Can all manufacturer price increases be justified? If a single ingredient spikes in price, is the entire product being raised by the same percentage? 

Price perception is not the only problem. The dunn-humby research shows that shoppers think retailers are making a 33% net profit! Wow! Wouldn’t the CFO be thrilled if they were! But as we all know the real number is more like 1 to 3 percent. FMI says that after-tax net came in at 2.9% in in 2021. 

Retailers need to understand that their shoppers are always hearing on the nightly news that inflation is cutting into their pocketbooks. Now, of course the government can’t make it rain more or stop 100-year floods and droughts. And it’s rarely reported that food inflation is global, not just confined to the United States. 

So perhaps now it’s time for the CEOs themselves to explain this on the news, along with what their company is doing about it. Better yet, retailers should be reaching out to their shoppers and letting them know that their whole team — from drivers to stocker — are working 24/7 with their suppliers to get them the best value they can, while showing a few specials. Show buying teams out in the fields, or in suppliers’ plants working to collaborate on cutting costs. 

Grocers need to empathize with their shoppers, showing in print ads and fliers that they understand the difficulties families are facing and are doing something about it. Highlight special buys, store brands, value sizes and how the retailers’ buyers are working with suppliers to cut cost without cutting quality. It’s about changing erroneous perceptions. 

Unfortunately, we are instead seeing bad decisions being made, like cutting pack sizes to try to fool shoppers into thinking prices aren’t higher. 

IDEAS TO CONSIDER

Here are a few ideas to consider. Key in on the best of the best — the old 80/20 rule in each category — and do forward forecasting with the manufacturer’s help. When you can, order in full truckloads, especially with today’s fuel costs and the shortage of drivers and equipment. Keep the prices of staples down by featuring easy and inexpensive dinner ingredients. Bring back Humpday Wednesday by featuring items like pasta, can tuna, mac and cheese. Promote the best-value protein items in your fresh department to help offset the rise in egg pricing. Offer larger packs on frozen meats, vegetables and potatoes and make sure to highlight the savings these packs offer to offset the higher ticket ring. Consider asking your manufacturers to put starbursts on the front of the packages calling out exactly this.

My personal favorite is bi-monthly store brand events featuring basic staple items tied in with related high-margin items, such as pasta with pasta sauce displays, displays of frozen chicken next to corn on the cob, peanut butter and jelly displays near your bread aisle. Try expanding facings on store brands or even national brands that want to stand up and partner on rolling back items for set periods of time. 

When the buying team gets a special buy, don’t let it go unnoticed. Make sure the item is flagged and called out on the shelf. Stress your store brand quality and value on every item and in your store signage. Now that the pandemic is slowing, partner with your manufacturers and start doing demos again. Demos do sell product! 

Make sure your online offering features the weekly value, special buys, new items and manufacturer coupons, something that Target does better than anyone in the industry. Feature those coupons in your advertising and on the shelf, and keep in mind that many folks have either stopped getting the newspaper or their paper has gone out of business.

‘WE’RE IN THIS TOGETHER!’

Finally, make sure — as a retailer or as a manufacturer — that your customer knows that you’re there to help. So highlight donations to food banks and have space set aside in the store for donations to the needy. Leave shoppers with the message that we’re all in this together. After all, we are! n

Bob Anderson is the retired VP/GMM at Walmart, where he worked for 17 years. He can be reached at bob.sue@sbcglobal.net.   

Bob Anderson

Bob Anderson

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Paul Chapa, Co-Founder & Managing Partner
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