Since 2021, inflation has been impacting consumers’ spending and shopping habits, and as we enter 2024, customers seem to be feeling the pinch now more than ever.
CivicScience reported its Penta-CivicScience Economic Sentiment Index — that tracks U.S. adults’ expectations of the economy and sentiment on current conditions — had fallen to its lowest point in a year, declining 1.1 points to 32.0 on Nov. 11. It then ticked up slightly to 34.2 by Dec. 19.
Despite a pessimistic consumer sentiment, inflation is reportedly slowing. On Dec. 12, the U.S. Bureau of Labor Statistics reported that the inflation rate had dipped to 3.1%, down from 3.2% in October and from a high of 9.1% in June 2022. But while inflation may be technically growing at a slower rate, it’s little comfort for consumers when costs remain elevated across the board compared to where they were pre-pandemic.
Not only are customers grappling with soaring food, rent and housing prices, but they’re also seeing the cost of most products from beverages to snacks to health and beauty items continue to increase.
To combat rising costs, more consumers are shopping for deals, while others have switched to buying store-brand products.
One c-store chain that has seen consumers’ shopping behavior change due to inflation is High’s, which operates 59 stores throughout Maryland, Delaware and Pennsylvania.
“We continue to see inflation and the worries over the economy impacting our customers and their shopping behavior,” said Brad Chivington, senior vice president of retail for High’s. “They are being more selective and thoughtful in their trips and choices. They are also looking for value, and we see that our loyalty rewards program and offers are of growing importance to our customers.”
Inflation’s Impact on C-Stores
But it’s not just shoppers reeling from the effects of inflation. C-store retailers are also feeling the impact of the rising cost of goods and labor and the effects of price increases on category performance.
“We see cigarettes, tobacco and some center store categories being most impacted by inflation,” said Chivington. “However, we continue to see growth in food, beverages and candy.”
For other retailers, managing the rising cost of food and determining when or if to pass costs onto the consumer has been a key challenge.
“We saw some of the biggest increases in prices in foodservice,” said Mike Gilligan, vice president of Gilligan’s Retail, which operates 10 sites in Arizona and two in Montana under the name The Welcome Shop. “In 2022 and 2023, we were constantly changing the prices on our menus. Even though we don’t change the prices as often now, we do see a return of higher prices in the future.”
Taking on Inflation
To help ease sticker shock, some retailers are working to provide customers with different options and opportunities to save money.
Rutter’s, which operates over 80 locations in Pennsylvania, Maryland and West Virginia, has begun developing new ways to keep consumers engaged in its products while helping them save on costs.
“We’re going to look at driving some new programs to engage customers here in Q1,” said Joseph Bortner, senior category manager for Rutter’s. “We’ll also look at creating new promotional activity through the summer to offer deeper value promotions for customers on their favorite brands. We have certainly added some new tools in the sales toolbox for 2024.”
Bortner also noted that it’s important for retailers to work together to create value propositions that resonate with customers.
“In 2024, consumers will be faced with tough decisions across the store on where they’ll be willing to spend their dollars,” he said. “The brands that look to lean in and create memorable value propositions will be the ones gaining shares throughout the year.”
Meanwhile, High’s and Gilligan’s are tackling inflation by focusing on their rewards programs and product mix.
“We are focusing more on personalized offers via our loyalty rewards program and giving customers greater value in fuel, tobacco and food offerings,” said Chivington. “We will also continue to focus on categories like candy and snacks.”
“We are paying more attention to our product selection,” added Gilligan. “As prices rose, we cut back on some of the product selections that we felt were duplicates, especially in candy and beverages.”
Inflation Continues
As time goes on, inflation is expected to continue to be a challenge for retailers and consumers.
“This inflation story is not finished yet,” said Gilligan. “We anticipate that prices will continue to rise in late 2024 into 2025 and beyond due to input cost (the expense of creating a product) increases for goods and services. Wage growth and energy costs being two areas of particular concern.”
Nonetheless, with 2024 being an election year, retailers hope to see some positive changes when it comes to inflation.
“This election year could possibly yield some positive impact as consumers look to vote with how they have been impacted in their wallets and looking for some real relief and positive economic answers,” said Chivington.
With inflation here to stay for now, retailers and consumers must continue to find new ways to navigate it.
“Inflation is going to continue to be around,” said Bortner. “It’s certainly a challenge that’s making us look harder at the programs and offers we have in place.”