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Soaring inflation doesn’t only affect what consumers buy; it also dictates where they shop. As gas prices spike, some habits learned during the pandemic, including limited trips to the grocery store, are set to make a comeback. This time it won’t be to protect health but to save money.
The national average gas price hit $4.32 last week, the highest ever in nominal terms, and some consumers are already rationing their car usage. One way to do this is to shop locally, perhaps more frequently, and to avoid driving to a big grocery store.
Now that retailers are shrinking their stores — Target Corp has more than 150 smaller outlets in urban areas — it’s possible to shop either on foot or using public transport. Target also has mid-sized stores in dense suburban areas, while Walmart Inc has 683 Neighborhood Markets, each one about one-fifth the size of a typical supercenter. Other chains close to where people live, from drug stores to dollar stores, have been increasing their food offerings.
Staying local means not only ditching the car but also improving control over
cashflow. Buying groceries nearer to the time when they are needed wastes fewer dollars on food that may end up being thrown away. With inflation at a 40-year high and expected to keep rising, conserving cash will probably become an even greater priority. But it’s not always possible to avoid driving to a grocery store.
In this case, limiting trips is the next best thing.
During the pandemic, when consumers resisted venturing out for fear of Covid infection, many avoided visiting several grocers and instead did one big weekly shop. This pattern is likely to be repeated now, and that will benefit Target, Walmart and Costco Wholesale Corp. These stores have not only a broad range of products but also a reputation for offering value for money. Costco and Walmart also pride themselves on their competitive fuel prices.
Kroger Co and Albertsons Cos Inc reward their shoppers with savings on fuel. This could be a deciding factor when people are figuring out where to do bigger shops. Traffic to these grocers’ stores, and gallons sold in their gas stations, typically increase during times of high fuel prices, Jennifer Bartashus, an analyst at Bloomberg Intelligence, has noted. Wherever they fill up their cars, consumers are tending to restock in round dollar amounts, such as $20 or $50, rather than fill the whole tank. This can be a leading indicator of consumer discomfort.
Lingering supply-chain problems complicate the picture. Some stores still have partly empty shelves, so consumers face a trade-off between hunting for what they want and spending less on fuel to get around.
Similarly, Aldi and Lidl — two European discounters that are expanding across America — don’t carry all the household brands that Americans are used to. Their US cousin, Trader Joe’s, also offers a limited range of primarily its own brands.
—Bloomberg