Quite frankly no state should impose sales taxes on essential grocery items at any time. However for those that do insist on fleecing their citizens in this way, it is helpful to drop or reduce taxes at a time when inflation is running high. That said, with food inflation now nudging upwards of 8 percent most of these tax holidays or reductions are a drop in the ocean for hard-pressed consumers. From a retailer perspective, it is hard to control input costs so focusing on other costs and ensuring operating discipline is vital.

Any incentives and goodwill are appreciated and valued by customers during this hyper-inflationary state. States pausing grocery taxes is a helpful incentive. However much more could be done at the individual store level to maintain sales and margins while extending goodwill to the customers.

Grocery stores have a unique opportunity to enhance and drive a more engaging, valuable, and loyalty-inspiring experience with customers. By increasing promotions, improving membership benefits, and other incentives, grocery stores could assist price-conscious customers in their time of need. Perhaps customers will be more purpose-driven and more conscious of their spending. However providing the right incentives may be a way to drive more traffic and increase conversion rates.

I think the move by the governors is essentially theater. Most states that have “grocery taxes” don’t charge them for the bulk of products the consumer buys in the grocery store for food or human consumption (though that definition varies widely). The amount we are discussing will not change consumer behavior one bit.

Retailers don’t have much choice on how to handle inflationary pressures. Some think that when the rate of inflation drops, prices will drop. What inflation does is create a new base for the subsequent price increase. The worst action a grocer can take is to hold prices hoping that tomorrow they can regain their margins and profits. If inflation is 7 percent this year and 3 percent next year, it is not a 4 percent increase in prices next year. It is a 10 percent increase in prices.

Tax cuts, pauses, and breaks are only effective if the source actually adjusts spending. Temporary tax alleviation will only result in higher taxes or other sources of “revenue” if spending stays at the same level. Customers will be liquid with their brand preferences more so based on shelf availability than moderate price adjustments. So the supply chain will play a critical role in maintaining brand loyalty. Walmart is poised to gain even more market share with their everyday low pricing, but other retailers can benefit by showcasing the best buys for the bucks. Larger bulk sizing with strong messaging/marketing touting the lower cost per unit price should be a key component of retailer strategy.

Great PR move for the states that tax food. Lots of fluff, little substance.

If nothing else, as a gesture — if nothing else — this should be very welcome by consumers. However, this assumes that it is actually passed on to the consumers and not absorbed in terms of additional margin for the retailers.

These things are always very difficult to understand whether it has had the desired impact. A recent example of a tax cut in by UK central government was a reduction of 5pence per litre of fuel, however there are many commentators who are suggesting that the saving has not been passed on to the consumers and fuel retailers taking a larger margin.