Supply chain disruptions and inflationary price pressure aren’t going away anytime soon, which could further frustrate consumers. But higher prices are not affecting everyone in the same way, said the National Retail Federation — even as the U.S. faces soaring gas prices due to the Russian import ban.
Jack Kleinhenz, the NRF’s chief economist, said while inflation is at a 40-year high, “it isn’t hitting all consumers as hard as top-line numbers might suggest.” The NRF said in its economic report that “consumer worries about rising prices could become self-fulfilling if workers demand higher wages to compensate and will play a role in the Federal Reserve’s efforts to bring inflation under control.”
Kleinhenz said after decades of relatively low levels, “inflation is on everyone’s mind and has been making consumers and businesses miserable as prices have picked up dramatically over the past year. However you measure it, inflation has become a powerful force and plays a key role in the nation’s economic outlook.”
The chief economist said while actual price gains are expected to slow down in the coming months “as they lap relatively high readings from the year before, the Fed is concerned about the risk of an unwanted jump in inflation expectations.”
Kleinhenz said if consumers anticipate “rampant inflation to continue,” the potential of a “wage-price spiral could be unleashed as they demand to be paid more.” He said in that scenario, the Federal Reserve would need to be “even more aggressive with its rate hikes — a move that might stop inflation, but at the risk of slowing the economy to the point of causing a recession.”
Regarding the supply chain, a separate report from the NRF revealed that imports at the nation’s major retail container ports “are expected to be at near-record levels this spring and summer as consumer demand and supply chain challenges continue to result in congestion.”
“Consumers are still spending and the supply chain is still working to keep up,” said Jonathan Gold, the NRF’s vice president for supply chain and customs policy. “Growth rates have slowed down from the off-the-charts numbers we saw last year, but volume is close to the highest we’ve ever seen.”
Gold said every business segment along the supply chain “is trying to reduce congestion, but there is still work to be done. Retailers are also planning for potential additional disruptions this summer from West Coast port labor contract negotiations.”
How are these issues affecting consumers?
In a survey of more than 20,000 shoppers, Shopkick concluded that over the past year, “consumers have been faced with significant supply chain issues and massive inflation, directly impacting the way they shop.” The company found that 81 percent of consumers polled “are now more likely to wait on making a purchase until there is a sale or coupon due to price increases and 79 percent would purchase the next best option if their favorite brands are sold out or low-in-stock, highlighting their wavering loyalty to brands.”
The most significant impact has been at the supermarket. The survey found that 80 percent of respondents “have noticed that more shelves are out-of-stock or low-in-stock at their usual retailers and grocery stores than they were 12 months ago.”
“Items they have noticed that are unavailable include meat products (53 percent), dairy products (52 percent), boxed goods (50 percent), canned goods (48 percent), toiletries (50 percent), fresh produce (30 percent), bottled water (29 percent), animal supplies (28 percent) and medicine (23 percent),” Shopkick noted in its report.
In a separate report by Cowen and Company’s Oliver Chen, the retail analyst said at Walmart, “we are concerned the retailer’s core shopper will get squeezed by surging gas prices and other commodity headwinds, although acknowledge a partial trade-off from shoppers trading down, along with its large price gaps to traditional peers.”
Chen said in his view, the best-positioned retailers in the current environment include Costco, Ulta Beauty and Planet Fitness. “More attractive factors include higher domestic exposure, lower exposure to commodity prices, exceptional pricing power underpinned by innovation, staple-like characteristics with recurring purchases, and deep value proposition,” he said.