The rampant inflation, especially high in the food sector, is causing a significant loss in the purchasing power of families. But everyone has to eat, so far from being harmed, supermarkets have shown positive billings at the end of the year, with a growth of 4.5%, according to the latest report published on the matter by the consultant Kantar.
Bearing in mind that, on average, the prices of consumer goods they have risen 5%, it seems clear that large retailers have transferred inflation, almost as it is, to families. But the situation, says Kantar’s Worldpanel division, could turn against it in the coming months due to a phenomenon known as down trading.
and what is he down trading? This English word, which we could translate as “bargain to the bottom”refers to a series of disparate behaviors with which consumers look for castanets to make the shopping cart cheaper.
“The consumer’s reaction to price does not follow mathematical rules, but psychological ones, so the buyer reacts to inflation with global movements to save, such as reducing the amount of food he throws away, decreasing spending on fresh products and opting, in greater measure, by the basic segments of categories and the distributor brand”, has pointed out Cesar Valencosoexpert in Mass Consumption at Kantar.
fighting the down trading
According to Kantar, the down trading causes reduced revenue and margins for the whole chain. And, although the main victims are the brand manufacturers, the consultancy assures that 2023 will be marked by the fight of the chains against this phenomenon.
And how are the chains going to fight against this? According to Kantar, finding the correct balance between quota and margin. Or, put another way, avoiding lowering prices too much, to continue passing all the inflation on to consumers.
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“The price is and has always been the main workhorse of the retailersand in an environment of uncertainty with high prices the temptation to use price as a competitive weapon it is almost impossible to avoid”, Velasco explained to InfoRetail last year. “The dust will settle at one point or another and when that happens we will be able to see again, as it has always happened, that those brands that have not let themselves be carried away for the moment and have continued to invest they will be the winners and will be in a better position to continue doing so in the next stage”.
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