Inflation fears are impacting wallets
Retail spending slowed in February amidst rising inflation
- Taylor Coyne
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Consumers are spending 38% more at the gas station compared to last year and it’s impacting where they spend elsewhere. These energy concerns are leading some retailers to invest in the future of electric vehicles.
Consumers are feeling the price pressure
Retail sales were subdued in February after a solid start to 2022. In January, sales increased 4.9% from December which is significant considering it’s coming off the holiday season. Since then, inflation and global uncertainty fears have got us all a little wary and many of us are cutting back. A gas station near my home in Southern California is close to $7.00 a gallon. It’s no surprise that spending at gas stations increased 5.3% month-over-month while categories like home furnishings and even online retailers saw drops in spending. The Consumer Price Index for gasoline is up 38% from February 2021.
Gas prices and grocery store products’ see significant price increases
We’re seeing this at the grocery store too, where items like meat, poultry, fish, and eggs are seeing prices 13% higher than in February of last year. According to a recent Consumer Pulse Survey by data analytics firm Dunnhumby, grocery costs now top the list of concerns of U.S. consumers, surpassing personal finances, the economy, and COVID-19. Spending at grocery stores dropped month-over-month but only slightly at 0.8%.
MoM change in retail spending as of February 2022
Retailers should take note of what Momofuku shared with its shoppers earlier this month. The Asian American food brand announced that it was raising its prices for the first time, by at least $1. It explained how increased costs of logistics, ingredients, and labor accounted for that $1. Transparency is always important, but in times like these, customers want to know why retailers made choices to raise prices. We’re likely to remain as customers if we feel price increases are reasonable.
Sustainability is top of mind
Concerns about the climate have been on top of many consumers’ minds for some time. According to a survey by NRF and IBM, “half of consumers say they’re willing to pay a premium for sustainability” and 62% would be willing to change purchasing habits to reduce environmental impact.
So what are retailers doing in response?
A Target in Vista, CA has installed solar panels over its parking lot and said that the panels will produce enough renewable energy to power the entire store. This is part of the retailer’s pledge to source 100% of its energy from renewable options by 2030. While I think this is a great move from a sustainable standpoint, as a SoCal resident, I can attest to the hot summers and would be thrilled to park under a shaded structure while doing my shopping. Bonus points for that structure providing clean energy.
Starbucks just announced that it is partnering with Volvo and Chargepoint to install EV charging stations in its parking lots along a route from Seattle to Denver. With 15,000 locations across the country, Starbucks is poised to be a crucial resource for electric vehicle charging assuming this pilot goes well. According to Deloitte, electric vehicle sales are expected to reach 31.1 million by 2030 globally (up from 2.5 million in 2020) and Statista predicts electric vehicles will account for 45% of the market in 2035.
EV share of total auto market