Inflation remains a pesky beast.
Despite prices easing in recent months, inflation’s cumulative effect has exacted economic strain on many families, who are grappling with a higher cost of living coupled with slower income growth. In short, the cost of a gallon of milk and a loaf of bread continues to rise while biweekly paychecks have remained nearly the same.
In a bylined article for Total Retail, Jill Blanchard, president of enterprise client solutions at Advantage Solutions, suggests that a recent slowdown in retail sales may have jarred the financial markets but represented a truth retailers saw coming months ago.
And they’ve been quietly taking actions behind the scenes to adjust, Blanchard says.
According to our recent Advantage Outlook, a survey of top executives at retail and consumer packaged goods companies, high-performing retailers are taking three steps that separate them from the rest of the pack: they’re raising prices less than others, they carry a broader assortment of national brand products, and they discount deeper.
Here’s a closer look at each of these three key measures retailers are taking, as well as two bonus strategies Blanchard says Advantage teams are seeing in the market:
1. Holding firm on pricing.
While it’s historically customary for retailers to raise prices on items commensurate with increases in their cost, those having the most success in this inflationary period are holding firm — or at least increasing less — their prices on key staples, Blanchard says.
“With the battle for unit volume at an apex, retailers continue to jockey for foot traffic. Many are finding that the best way to retain and recruit shoppers is to keep prices in check on core products,” she says.
2. Carrying a broader assortment of national brand products.
Even with prices on the rise and a growing percentage of consumers feeling the pinch, today’s shoppers demand choice, Blanchard says.
“And that’s a powerful driver in where they decide to shop,” she says. “Retailers that offer choice — at varied price points — are winning the fight for volume.”
3. Incorporating promotional pricing and discounts.
Retailers are adjusting their promotional strategies to selectively offer deeper discounts, aiming to attract budget-conscious shoppers without compromising profitability.
This includes targeted promotions timed to coincide with consumer payday cycles and special events. Major retailers like Walgreens and Target have recently announced substantial price cuts across various product categories in response to consumer needs and flagging sales.
Bonus strategies Blanchard and team are seeing with more frequency:
- Flexible payment options: To accommodate financially strained consumers, retailers are increasingly offering flexible payment solutions, such as buy now, pay later. This option allows consumers to spread out payments for everyday necessities, providing immediate relief for budget-sensitive shoppers facing unexpected expenses.
- Enhanced rewards programs: Loyalty programs have become a cornerstone of retailers’ strategies, offering personalized rewards and incentives to encourage repeat business. By leveraging data analytics collected from these programs, retailers can tailor offers to individual shopping preferences, enhancing customer satisfaction and retention.
The bottom line: Retailers Must Remain Nimble
The effects of inflation on consumer behavior have been profound, reshaping how Americans approach their everyday expenses. With one eye on their budgets, shoppers have become more discerning. They’re seeking discounts, buying more lower-priced brands, and prioritizing value-oriented staples.
And even if grocery prices hold firm starting today, the cumulative effects seen over the past few years will linger for months, if not years.
The good news is that retailers, for the most part, saw this coming, and they continue to evolve their approach.
Retailers that continue to innovate across pricing, assortment, promotional strategy, and payment flexibility will be best positioned to win.
See Blanchard’s full story on Total Retail for more insights.
