A new report from Bank of America Institute (BofA) revealed that U.S. consumers are changing their spending habits and where they shop for groceries due to high inflation and 19 consecutive months of negative real wage growth.
Entitled "Supermarket Swapping," the consumer trends study found that users are "trading down." That is, shoppers are choosing to purchase less expensive items within the same product category, some of them migrating from more expensive to less expensive supermarkets entirely. As noted by BofA:
Middle- and higher-income consumers have more scope to trade down and shift spending to less expensive versions of items, since lower-income consumers are more likely to be shopping at less expensive grocery stores already. For the higher-income consumers, spending at value-tier grocery stores in October 2022 was up 22% relative to January 2019
Real "grocery spending" drops
The study, based on data from customers and their card purchases, noted that last October, "real (inflation-adjusted) grocery spending per household has slowed substantially since 2021 and was below 2019 levels in October." However, the number of transactions made per household is still in line with 2019.
This indicates that "real grocery spending per household per transaction that has dropped meaningfully." In other words, consumers continue to shop with the same frequency at the supermarket, but they have changed their spending habits to buy cheaper goods.
BofA notes that middle- and higher-income consumers are most likely to be the ones making the "rotation" into cheaper products, as lower-income people are already accustomed to always shopping around for the lowest prices.
The report focused on households with annual incomes of $50,000 to $100,000 per year.