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Brands need to prepare for sales impact as inflation drives people to defer, reduce or trade down

Updated: May 19, 2022

COVID related concerns are thankfully slowing, and consumers feeling more comfortable re-engaging in activities they had stepped away from these past 2 years.

However, consumers are now shifting their focus to the economy and record-breaking inflation (+8.3% in April’22 vs year ago) is taking on a priority concern.

Variety of research indicate that overall, we are in the beginning stages of inflation’s impact on purchasing, as spending is still strong, with many people having accumulated wealth through savings during the pandemic and government stimuli. However, as people see continuous cost of living increases, they are becoming anxious and starting to plan and act on what they need to do differently.

BCG Mar’22 survey finds

71% say they plan to cut back on spending due to price increases, and this applies across income levels.

While BCG found people overestimating price increases in many categories, we need to remember that how people “feel” will dictate how they act, whether their facts are right or not!

What people plan to cut back on varies and will impact categories differently. In March’22 here are what people planned:

  • No change — Everyday essentials: e.g., Housing, Gas/Fuel, Health

  • Plan to trade down — Essentials: Communications, Food and Beverages, Transportation

  • Plan to buy less — Non-essential, Indulgences: Restaurants, Recreation & Culture, Clothing

People will become more disciplined in their actions as inflation goes higher.

Brands need to continue to emphasize their quality and habit / familiarity which are main drivers of product choice. But they must figure out how to stay shoppers’ top choice as people start to cut back spending.


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