Budget-Strapped Shoppers Splurge on Small-Ticket Items, Scrimp on Major Purchases

This week in paycheck-to-paycheck shopping news, retail brands are sharing that consumers are becoming less cautious in their spending on small purchases such as groceries, even as they continue to show belt-tightening behaviors for large-ticket products such as furniture.

Consumer packaged goods brands Mondelez International and Procter & Gamble both shared on their earnings calls Tuesday (July 30) that they have seen their customers be willing to keep spending on their products.

Dirk Van de Put, chairman and CEO of Mondelez International, which owns many popular grocery brands including Oreo, Cadbury and Philadelphia (the cream cheese), shared on an earnings call with analysts that it is seeing shoppers’ trade-down to store brands slowing down.

“Overall, we are seeing volume growth start to rebound as inflation cools,” Van de Put said. “Consumer incomes are rising, which helps to reduce the inflation-driven financial strain on many households. As a result, private-label growth in our categories is decelerating, while branded share growth is improving.”

Similarly, on a call discussing Procter & Gamble’s earnings results, Jon Moeller, the CPG giant’s chairman, president and CEO, pushed back on claims that consumers are exhibiting elevated cost-cutting measures.

“We generally don’t see the dynamic that some are describing,” Moeller said. “… If you look at … private-label shares as an example, which typically would be increasing during a time of significant consumer pressure, that’s not what we’re seeing. Private-label shares generally both in North America and Europe are in line with pre-COVID levels.”

Overall, many consumers have traded down on grocery products amid rising prices. A PYMNTS Intelligence survey of more than 1,700 United States consumers in January found that 86% of grocery shoppers have changed their purchasing behavior in response to inflation, and 34% have traded down to buying lower-quality products.

While CPG brands maintain that consumers are choosing name brands, shoppers continue to exhibit high levels of deal-seeking behavior when making larger purchases such as home furnishings. Kate Gulliver, chief financial officer and chief administrative officer of home goods eCommerce retailer Wayfair, noted on an earnings call Thursday (Aug. 1) that the company has seen shoppers still holding off until sales periods to make purchases.

“Consumers have remained cautious in the category for years, and we’ve continued to see a pronounced spread in performance between promotional and non-promo days,” Gulliver said. “… [Yet] outperformance on promo days does not mean that sales strength is driven exclusively by discounted items. Less than one-third of our sales during promotional events come from featured items, and that has been quite consistent over the past year. … Consumers are willing to spend in the category once they are engaged in shopping.”

Shoppers have been looking for less expensive options for these major purchases. The “Consumers Shop Secondhand Stores as Often as Other Retail” installment of the PYMNTS Intelligence “Consumer Inflation Sentiment Report” series found that among the 43% of consumers who used secondhand channels to make retail purchases last year, 28% did so to buy furniture.

For all PYMNTS retail coverage, subscribe to the daily Retail Newsletter.

The post Budget-Strapped Shoppers Splurge on Small-Ticket Items, Scrimp on Major Purchases appeared first on PYMNTS.com.