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CHICAGO — Americans have an exaggerated perception of food retailers’ profit margins and overestimate the impact of inflation on grocery prices, according to a new report.
According to the latest dunnhumby Consumer Trends Tracker, U.S. consumers think the net profit margin for grocery retailers is 35.2%, or 14 times higher than the 2.5% margin actually claimed by the retailers. And consumers peg the rate of food-at-home inflation at 24.3%, dunnhumby said, or twice the annual rate reported recently by the U.S. Bureau of Labor Statistics.
Dunnhumby also found that customers were coping a little better than they were when the previous version of the report was published. Consumers who reported they would have difficulty covering an unexpected expense of $400 dropped from 64% in July to 60% in November. In addition, 48% of consumers reported they are getting the kind of food they want to eat compared to 43% in the earlier wave.
“We found that retailers are in a precarious position with their brand perception, since customers are vastly overestimating grocers’ store profit margins and inflation rates, while they themselves are battling food prices,” Matt O’Grady, president of the Americas at dunnhumby, said in releasing the latest results, on February 15. “Retailers need to show they are empathetic to customers through their prices, their rewards/loyalty offers, and with messaging to best support shoppers during these challenging financial times.”
Among the study’s key findings:
• Inflation worries are driving customer sentiment. When asked as part of the survey why customer sentiment is the lowest it has been in 50 years, respondents by a five-to-one margin cited inflation, with COVID-19 coming in a distant second. When asked about 2023, only 22% of respondents predicted that inflation and the state of the country will get better. Forty-seven percent predicted inflation and the state of the country would improve three years from now. Over a five-year period, 54% of consumer are optimistic that their own finances and the state of the country will improve.
• Younger shoppers are most optimistic, but only in the short term. For 2023, 31% of consumers between the ages of 18 and 34 believe their finances and the state of the country will get better, compared to just 13% of consumers older than 65. Over a three and five-year time frame however, there were no significant differences by age.
• Food insecurity remains a problem. Thirty-one percent of households reported they have skipped or reduced the size of a meal for financial reasons. Thirty-nine percent of respondents under the age of 44 have skipped or reduced meal sizes. And households with children at home are 8% more likely than adult-only households to have skipped or reduced meal sizes.
• Consumers continue to struggle financially. While no state is immune, those with the highest rates of financial insecurity are Oregon, Oklahoma, Louisiana and West Virginia. The states with the lowest rates of financial insecurity are Minnesota, Wisconsin, Maryland and Delaware.
• Consumers want easy-to-shop and more convenient e-commerce solutions. Eighty-one percent (up 4%) of consumers say easy-to-shop websites and apps are important, and 78% (up 4%) want retailers to have more-convenient delivery and pickup time slots. For consumers age 55 and over, ease and convenience are even more important. Families are 16% more likely to interact with a store’s app and have a 10% greater need for the retailer to pick products as well as they would, compared to shoppers without children.
• Consumers want retailers to help them make healthy choices. Forty-four percent of consumers reported that it was very or extremely important for retailers to help them make healthy choices, an increase of 3% from the previous wave.
