The shift in spending is affecting retailers across the country as they look for ways to offer more affordable products to their customers.
With inflation near a four-decade high, American shoppers are watching their pennies and adjusting their spending habits, and the companies that serve them are taking notice.
The shift in spending is hitting retailers across the country, from behemoths like Walmart to your neighborhood grocery store, as they look for ways to offer more affordable products to their customers.
Here are four examples of what businesses across America are seeing and how they’re adapting to the new reality of shopping.
The family supermarket that offers gasoline promotions
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 70s and 80s has never seen a period like this.
“It’s a challenge, for sure. There’s no question about it,” says Tom Charley.
Charley Family Shop N Save’s three markets have long prided themselves on high-quality service, with in-store butchers and bakeries. But today, the company’s newspaper ads are more likely to feature discounted yogurts than premium hand-cut steaks.
“Today we are more focused than ever on price and making sure we can get items that people care about at the best possible price,” says Charley.
That means beating around the bush for lower prices on everything from bananas to the plastic wrap used to package prepared foods. Even when shoppers are trying to save money, Charley says, they still want the convenience of pre-cut vegetables or market-made kebabs.
“Convenience is king,” says Charley. “They want it more and more every day.”
That’s labor intensive for supermarkets, which employ more than 200 people. But they still have to be cost competitive, especially now when grocery prices have been going up at a double-digit annual rate.
“We never said we’d be the cheapest,” says Charley. “And we’ve never said we’re going to be the Whole Foods of the market either.”
Charley’s supermarkets reap many benefits by offering a discount at the gas station through a promotional link with Sunoco. Customers save 10 cents per gallon of gas for every $50 they spend on groceries.
“Our customers love that promotion,” says Charley. “Everyone I know who shops at my store uses it.”
Cheapest train sets and search for used models.
The Smoke Stack Hobby Shop in Lancaster, Ohio, sells train sets, radio-controlled cars, and model airplanes. Sales soared early in 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 get past the $50 mark, someone has to think hard before buying a kit like that,” says Patti Riordan, who runs the store with her husband, Don. “So we’ll still get some of those higher-end ones, but it’s definitely going to be a lot less.”
Instead, Riordan stocks more mid-priced models, selling for around $35. And a growing portion of his sales now come from used items that another hobbyist sold or traded.
“We buy a lot of collections so people can buy a model kit or rolling stock for their train design at a fraction of the cost of a new one,” says Riordan. “And that’s been a huge support for people this year.”
Riordan says that while finding and listing used hobby items is a lot of work, it’s rewarding when old railroad cars or other items find new owners.
“It’s a good way to recycle those things,” says Riordan. “It really allows for a lot more flexibility to keep the shop running. And that, I think, gives us the strength to get through some of these things.”
Ice cream in smaller portions and lower prices
Victor Garcia runs a Mexican-style ice cream company in the Fort Worth area that specializes in flavors like mango, tres leches and tequila.
“Our whole mission is to make people happy by sharing a part of our Mexican culture,” he says.
This summer, Garcia noticed that some customers at his SolDias stores were cutting back on their orders, perhaps buying just one item instead of two. The average transaction dropped from $13.50 to about $12.25.
“That was the first indicator that maybe a recession was coming,” Garcia says. “And we have to be a little more flexible with our budget-conscious consumers.”
Garcia has started offering smaller portions at lower prices. He is also looking for cheaper paper suppliers and exploring whether he 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 is for customers to say, ‘That place is out of our budget,’” Garcia said. “It’s up to us as a business to really listen and pivot and give the customer the experience they want.”
More hot dog sales, fewer deli meats at Walmart
Walmart reported a drop in quarterly earnings last week, saying cash-strapped shoppers have been selling out and filling their shopping carts with less expensive items as they have become more sensitive to rising food prices.
“As an example, instead of higher-priced deli meats, customers are increasing purchases of hot dogs, as well as canned tuna or chicken,” says CFO John David Rainey.
Cash-strapped shoppers are also turning to more private-label products, rather than brand-name products. And in some cases, they have to make do with smaller packet sizes.
Walmart says that so far, back-to-school sales have been strong. But customers are wary of spending outside the grocery aisle. That forced the retailer to offer deeper discounts on other merchandise as he tries to get rid of unwanted inventory.
At the same time, Walmart says it’s seeing increased traffic from high-income shoppers, who are turning to the discount chain for bargains.