Despite the fact that the economy is starting to improve, it will be a while before shoppers feel comfortable paying high prices — but higher prices may be just what retailers and manufacturers have in store for them.
That’s according to Symphony IRI Group, a Chicago-based research firm, which recently released its latest consumer packaged goods report, CPG 2011 Year in Review: The search for footing in an evolving marketplace.
Specifically, the report shows that more than half of shoppers still choose stores based on lowers prices and the firm predicts that will continue to be the case in the coming year.
“Among optimistic and pessimistic shoppers alike, all indications point to continued frugality and conservatism in 2012,” says says Susan Viamari, editor, Times & Trends,SymphonyIRI.
However, the report also predicts that many manufacturers and retailers will feel forced to raise prices in response to their own price increases, having exhausted options for absorbing increased costs, such as cutting other costs and streamlining the supply chain.
“Running out of efficiencies and sensing the shopper’s ability to pay more, SymphonyIRI expects manufacturers and retailers to become more aggressive about passing costs along to consumers,” says John A. McIndoe, the firm’s senior vice president for marketing.
The report also predicts that retailers will continue to expand their private-label lines, which currently account for 18-20% of dollars sales. And, manufacturers will expand their focus on innovations as the primary private label mitigation strategy.
Another likely trend in 2012 is the continued evolution of the drug store.
“Walgreens, for example, plans to convert at least 500 stores into “food oases” where space space devoted to food and beverages will grow as much as 35-40%,” McIndoe says. “These stores are located largely in lower-income neighborhoods, where access to fresh food is limited.”