Most affected categories will be higher-end products and discretionary purchases. People still have to eat and heat, and even go to the movies.

Discretionary categories are certainly at risk, consumers are likely to put off what they can while household budgets are under pressure. The perfect storm of supply chain challenges doesn’t help with prices, but it might serve to help with inventory should demand drop because consumers are tempering their demand.

A number of things are likely to happen based on what we have seen over the past 15 years or so. Product size will drop with pricing staying the same – dubbed “shrinkflation” by the media. Consumers may well shop “one tier down” – this could either be with the type of product (buying mid-range instead of top tier) or with the actual retailer – discount grocers could continue to take a larger slice of wallet share. Some more luxury categories are likely to be at risk of reduced sales – for example premium beers, luxury desserts, and high-end meat products. Equally consumers may seek to move to retailer own-labels more than before. Some categories could well increase in sales – after the global financial crisis, grocers selling at-home fine dining type products saw an increase in demand for these products as people sought to emulate a restaurant experience in their own home. Consumers may also look to buy bigger pack sizes of non-perishable items – cleaning products, laundry and dishwashing liquid, and toilet paper.… Read more »

The one behavior we can expect is that it will be different behavior than today and will continue to evolve as inflation and other disruptions cause consumers and retailers to shift their practices. One thing is certain – retailers who don’t consider this shift will lose out while others will profit from listening to their customers. Consumers won’t all do the same thing and every category is going to be impacted differently. The important thing is to build the processes, systems, and practices to react as consumers shift, so they can continue to find the best products at the best price through the right channels at all times.

Premium priced brands will be impacted the most by inflation as consumers trade down to private label or discount brands. While consumers will consciously reduce spending on discretionary merchandise and services, the demand for essential items is inelastic. However consumers will trade down to private label brands.

Higher gas prices mean less driving (for consumers), so rural areas might see a drop in frequency of store visits. Places where people have to make a day trip out of going to the nearest Walmart. On the other hand, this might push up online sales and deliveries. We should see further price-increase pressure on UPS, FedEx, and other last-mile delivery services as they rack up the miles running on $4-plus gas. Anything with a long-haul logistics trail will be impacted as well as services which will show up at POS. Even my pool guy has raised his price 6.4 percent to account for higher gas prices. If wages don’t keep up we may be in for a tough couple of years. We have been living in a bubble of no/low interest for years. Now, as the Fed ratchets up rates, banks might actually start to paying interest again. Let’s see if consumers remember that savings should offer some protection from inflation. Or if they lean toward spending more, sooner than later, while last week’s… Read more »

As inflation climbs, premium-tier grocery, beauty and apparel sales will decline as more shoppers become price-conscious. Unlike Q4 2021, cross-category luxury sales have made fewer headlines lately.

Conversely, retail giants, discounters, dollar stores and off-price retailers will win traffic as inflation erodes consumers’ purchasing power.

Expect more retailers to prioritize private labels, especially in high-frequency categories like grocery. Retailers will also emphasize deals and discounts to encourage shoppers to switch for better value.

Discretionary spending will defintely be affected, and I believe we will continue to see the growth and push we saw in private/house labels during the pandemic.

Consumers are already starting to shift where and what they buy in response to higher prices. Off-price has seen customer gains in apparel and Walmart has seen some gains in food. That said, responses are complex and multifaceted. It is not simply a matter of trading down. In food, for example, as people cut back on dining out to save money, premium brands can make gains as folks switch to having nice meals at home. In apparel, luxury brands continue to do well as consumers see them as a long-term investment. Retailers need to respond to shifts in behavior, but they should not do it in a knee-jerk way without understanding the shifts.

Inflation is a symptom of some larger issues, the main driver being freight and supply chain shortages which are likely to peak again with new international shut downs and continued rising oil prices. Home textiles is one category most at risk right now. Consumers are going back out, spending less time at home, while also considering the fact that shipping a comforter set is a large bulky item mainly full of air due to its fluff. Discretionary spending on things like this will likely be hit first.

As prices continue to rise in nearly every category, the average citizen has considerably less discretionary dollars than a year ago. Clearly, high-priced, premium brands will be impacted the most, while in-house and private label brands will see gains.

Happy days for TJX and Ross stores. Happy days for private label foods. Challenges for national brands.

Grocery has already shown price increases and we will start to see a significant shift in apparel and footwear. Comfort categories, performance brands, synthetic fabrics and petroleum based textiles will have a significant raw material price increase which will impact the end-consumer. Price of oil and gas, the Russian/Ukraine war impacting the tech gig economy, and overseas factories where COVID-19 still impacts factory workers will continue to disrupt the supply chain and tremendously impact cost of goods.

In the end, the consumer will either pay the price or stop shopping. They will spend less and become more frugal. Consumers will second guess getting in their car with increased gas prices and avoid the shopping mall and their favorite online stores. Groceries will be streamlined and consumers will look for deals more than ever.

The answer to which product categories are at most risk from rising inflation is that it depends on the economic segment of the consumer market we are referring to. Assuming we focus on the middle class, then most if not all of the discretionary spending and impulse shopping will be impacted. Consumers will have to evaluate their overall budget and think twice before buying that aspirational luxury item, upgrading to the latest iPhone, and trading their car in for the latest version.

The relentlessness of the inflationary pricing, the continued supply chain disruptions, rising gas prices, and the global impacts of the invasion in Ukraine will significantly affect middle-class spending behaviors. The opposites of the spectrum — the off-price and luxury retail segments — will continue to thrive and scale. Their operating models are built to withstand the economic upheaval and will continue to thrive while the middle is further compressed.

When faced with higher prices but fixed incomes (in the short term), typically many consumers adjust their consumption patterns and brand choices to maintain some balance in their monthly expenses and incomes. I would expect to see increases in private label shares and substitute main meal choices. Less red meat, more pancakes (pancake mixes and syrups are actually inferior goods in economics parlance), and less eating out.

Categories that require financing will be first hit by inflation – large appliances, furniture, and motor vehicles. The secondary hit will be based on increasing fuel prices to categories requiring long distance transportation or large package sizes. Rapid delivery and e-commerce across the board may also see an increase in shipping costs. Lastly, there is a bit of a hidden cost to the retail euphoria as retailers see higher spend, about 1 percent of retail growth can be attributed to inflation. Fundamentals are still high across the board including consumer sentiment, low unemployment, faster wage growth, and more discretionary income. U.S. consumers are spending more on goods as well, by about 6 percent according to insights from Cushman Wakefield. Retailers will embed the new cost into prices, increase shipping costs, and reduce markdowns across the board. What this means is a slightly higher price at the store. For a $2 candy bar, a 7.5 percent hike will be barely noticeable, but it will add up in monthly budgets. It will be most noticeable for higher… Read more »

Interest rates are going to blossom, house prices will be a big issue. Mixed with the world-wide political strife, and very apprehensive consumers, there will be a lot of apprehension in the markets. We’ll still do business, but we will all work harder and thinner.