Consumer Behavior

Increasing food costs driving retail consumers to spend less

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November 21, 2022

The cost of living, from food costs to credit card bills, is playing a role in what consumers are doing when it comes to spending, according to a report from The NPD Group.

The industry is seeing pre-holiday declines in general merchandise sales while grocery spend continues to increase, according to a press release on the findings.

The U.S. general merchandise retail sales revenue declined in the three weeks ending Nov. 5 and year-over-year sales revenue in October fell 5% below a year ago, followed by a 14% decline in the first week of November, according to the research.

"The growing weekly grocery costs and monthly credit card bills have begun to chip away at discretionary purchases," Marshal Cohen, chief retail industry advisor for NPD, said in the release.

"Consumers can only absorb climbing expenses for so long before they begin to reassess their spending capacity."

Yet, at the same time, spending on food and beverage and other consumer packaged goods continues to exceed results of any of the past three years. In particular, rising food and beverage prices and the shift toward consumer spending on food in general is now affecting spending in other areas.

Compounding these challenges are endless discounting on existing product inventory, prolonged warmer-than-normal temperatures delaying the typical seasonal shift to cold weather products, and distractions from the midterm election.

"Rising interest rates and other aspects of the economy are affecting consumer confidence, and the lack of new product is impairing their need and desire to spend," Cohen said in the release.

"Over the holidays and into the new year, consumers will be looking for exclusive product offerings, uniquely compelling benefits and promotions that break through the noise and create a sense of urgency to make the purchase."