The Covid-19 crisis, the war in Ukraine, massive stimulus plans… there are many explanations for the current inflationary period.
In this context, shoppers are increasingly preoccupied by sudden increase in prices. 58% of shoppers1 say that this is one of their main worries.
To get around this, they are adopting new shopping habits: looking for price reductions, anticipating purchases for the holiday season, trying out new brands…
Read about the impacts of inflation on consumer shopping habits and how businesses are adapting.
The impacts of inflation on consumer shopping habits
1. Increased focus on prices
In any inflationary context, shoppers pay greater attention to prices with 90% of shoppers2 saying that they have become more frugal.
For example, they prefer shopping online to get the best deals. Nearly 41% of shoppers3 believe that for the same price they can find products of superior value online.
They also look for reductions, coupons and cashback offers. 90% of shoppers4 are increasingly drawn to these rewards and 71%5 spend more time researching online, before buying, to get the best value for their money.
2. Diminished customer loyalty
During contexts of inflation, shoppers are less loyal to their preferred brands6 and tend to switch towards more economical options.
When prices increase 97% of consumers6 are more inclined to try out new, cheaper brands.
They are also more likely to buy from several different retailers. The proportion of consumers buying from more than five retailers5 increased by 28%5 from 2021 to 2022.
3. More control over spending
Inflation is leading shoppers to monitor their budgets more closely. For example, they are anticipating the holiday season and shopping early to avoid price increases, and 56% of shoppers5 will delay or cancel their purchasing projects when prices are increased by too much.
Shoppers also find various strategies for limiting spending, including buying less (40%7), choosing cheaper brands (21%7), preferring DIY gifts (21%7)…
How businesses are adapting to these new shopper behaviors
Provide the possibility to pay in installments
To remain competitive during inflationary periods, it has become vital to provide BNPL (Buy Now Pay Later) options.
These installment payment options allow shoppers to pay easily in a series of smaller amounts (payment in 3 or 4 installments…). This encourages them8 to commit to their purchase despite increasing prices: 48% of shoppers9 use BNPL for purchases which would not otherwise fit in their budget.
From a company perspective, installment payment is a fantastic business opportunity and provides many benefits:
- Increased conversions
- Improved customer loyalty
- Better consumer engagement
Inform customers about upcoming price increases
In an inflation context, rising prices can have a negative impact on customer engagement as potential shoppers might not accept your price increases and may turn towards your competitors.
To avoid this, as a business you should warn your customers of your intention to raise prices (at least one month beforehand10). You should also increase prices gradually so that the increase is not seen as too brutal by customers.
It is essential to communicated transparently. If a business does not communicate clearly on their intentions, the risk is in creating frustration among their clients which will automatically result in a drop in sales. For example, shrinkflation strategies can negatively impact your customers' commitment to your brand. Shrinkflation11 is a sales strategy consisting in masking inflation11 by presenting a product in smaller quantities using the same packaging and price as before.
Set realistic prices
To remain competitive during periods of inflation, businesses have to enter a price war12 and constantly monitor the competition. This competitive watch is essential. Amazon uses it to adjust their prices several times13 a day meaning that this global giant can react to changes within the hour.
To do this effectively requires the use of a Product Information Management (PIM) solution equipped with a Smart Comparison module. This will greatly increase productivity in the competitive analysis of your competitors: optimum price monitoring, analysis, warning signals… It will also increase competitiveness and allow you to determine prices consistent with the market.
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