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How frugal shoppers are helping to fight inflation

Brooks Johnson, Star Tribune on

Published in Home and Consumer News

It's not just the Federal Reserve that can fight inflation — consumers can, too, by changing their buying habits, Deloitte researchers say.

Consistent frugal behaviors by enough people can force retailers and manufacturers to keep prices, and profit margins, in check. But a new longitudinal study by Deloitte found not everyone is curtailing their spending.

"When consumers signal they can no longer tolerate higher prices, retailers and consumer products companies could begin to lose their pricing power," the study says. "It may be painful, but frugality is expected to precede and, with time, contribute to decreased retail food inflation."

Deloitte's Food Frugality Index measures the adoption of several cost-saving behaviors. Low-income Americans are consistently buying store brands, cheaper proteins and focusing on necessities. Middle-class shoppers are increasingly using everything in their fridge and pantry and taking extra time to plan shopping trips.

"That pressure should be making less expensive foods more popular and taking the price level down, not up," said Mark Bergen, the James D. Watkins Chair in Marketing at the University of Minnesota's Carlson School of Management.

But at the beginning of the year, Deloitte found high-income Americans were less frugal than they had been in previous months, and they often left the grocery store with everything they needed plus several "nice to have" items.


"There will always be a market for premium products," said Barb Renner, a Minnesota-based partner at Deloitte. "It's that in-between product where consumers are making choices."

When consumers widely choose higher-priced items when lower-priced alternatives exist, companies can keep prices high and potentially push them higher.

"For 20 years it has been hard for a manufacturer or retailer to ask for a price increase," Bergen said. "For the last year that has been possible, so if you're a seller, you're going to try to push that window as long as you can."

Food prices rose an average of 2.5% annually for decades, until they jumped 11% in 2022 in part because of rising costs for labor, ingredients, energy and transportation. For 2023, the U.S. Department of Agriculture predicts another 9% jump in grocery prices.


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