Shoppers believe that grocery retailers are earning a 35.2% net profit margin, a whopping 14 times higher than grocers’ actual average of 2.5%, according to a new nationally representative survey from Chicago-based customer data science firm dunnhumby.
Some 2,000 respondents in the November online survey indicated that they believe food-at-home inflation is 24.3%, double the annual rate reported at the time by the U.S. Bureau of Labor Statistics, dunnhumby reported in its Consumer Trends Tracker report.
The latest figures show that food inflation was up 10.1% in January, compared with year-ago levels, including an 11.3% increase in food-at-home prices.
“Retailers are in a precarious position with their brand perception, since customers are vastly over-estimating grocers’ store profit margins and inflation rates, while they themselves are battling food prices,” Matt O’Grady, dunnhumby president of the Americas, said in a statement. “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.”
Consumers, nevertheless, are coping better with the perceived inflation.
Individuals who reported they would have difficulty covering an unexpected expense of $400 dropped from 64% in July to 60% in November 2022, the survey revealed. Forty-eight percent of consumers also indicated that they are getting the kind of food they want to eat, up from 43%.
Consumers, meanwhile, overwhelmingly list inflation as the top reason why customer sentiment is the lowest it has been in 50 years, and just 22% predicted that inflation and the state of the country will get better in 2023.
Yet, 47% of survey respondents predicted that inflation and the state of the country will improve in three years, and 54% indicated it will do so in five years.
While 31% of consumers aged 18 to 34 said their finances and state of the country will improve in 2023, compared to just 13% of persons over 65, there were no significant differences by age over a three and five-year timeframe.
Many consumers also list food insecurity as a problem, with 31% of households reporting that they have skipped or reduced the size of a meal for financial reasons, including 39% of respondents under age 44.
Households with children at home are 8% more likely than adult-only households to have skipped or reduced meal sizes.
Among states, the highest amounts of consumers indicating they have skipped or reduced the size of meals last year are in Idaho, Oklahoma, Arkansas, Tennessee, and West Virginia. The lowest numbers were for shoppers living in Washington, Minnesota, Michigan, Massachusetts, and Maryland.
Oregon, Oklahoma, Louisiana, and West Virginia are states with the highest rates of financial insecurity, with Minnesota, Wisconsin, Maryland, and Delaware having the lowest rates.
E-grocery shopping, meanwhile, is becoming more popular with a wide range of shoppers, the survey found.
Eighty-one percent of consumers said easy to shop websites and apps are important to them, up 4% from July, but 78% want retailers to have more convenient delivery and pick up time slots, a 4% increase.
Ease and convenience are more important for consumers aged 55 and over, while families with children 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.
Indeed, 44% of consumers reported that it was very or extremely important for retailers to help them make healthy choices, an increase of 3% from July.
In addition, 48% reported that they choose healthy foods while shopping, up 2%; 40% read diet and nutrition information, a 2% gain; and 29% are buying products for a specific diet when they shop. (The top five diets cited in the survey are keto, low carb, low sugar, vegetarian, and gluten free.)
**
Were you aware of the discrepancy in shopper perceptions of net profit margins vs. reality? Are you taking any steps in terms of price / loyalty / other messaging to offset that perception? Let us know in the comments below, or email your thoughts to SN Executive Editor Chloe Riley at [email protected].
