Withdrawal of consumption due to price increases – What is the picture in retail trade

Moderate optimism prevails in organized retail, with forecasts for the course of consumption this year being liquid. At the same time, a major issue for Greek households continues to be the cost of food and covering basic needs, with the economic staff of the government mobilizing to combat the effects of price increases in combination with the shopping card (Market Pass) and the “household basket” .

Within this framework, according to what was announced, in about ten days the electronic platform for the shopping card (Market Pass) will be ready, which will breathe life into thousands of households by strengthening the purchasing power of citizens in a period of intense inflationary pressures.

As far as the “household basket” is concerned, the Ministry of Development and Investments is proceeding with the addition of new product categories and from the 51 items that the basket currently includes will reach 60. The products that will be included in the basket, among others, will be milk long-life and evaporated, yellow cheeses, beef, cured meats, soft drinks and chocolates. It is noted that, according to the Minister of Development and Investments, A. Georgiadis, during its 14th week of implementation the “household basket” maintained its value. Of the 833 products, 65 showed an increase, 48 showed a decrease and 720 remained stable. According to the minister, the first new reductions in the “household basket” are expected within February.

At the same time, three new household baskets are expected to be launched in the near future. Specifically, the ministry is planning a basket with fasting items due to Lent, then there will be a basket with the items related to the Easter table, while a basket is also planned for children, as happened during the Christmas holidays. Also, the ministry is launching the change of signage in supermarkets. In fact, next week the ministerial decision will be ready for the price per liter or kilo to be clearly visible on supermarket signs so that the consumer can see the price per unit.

Consumption declines in January

The first month of the year is over and things don’t look rosy in organized retail. As IRI’s senior consultant points out speaking to APE-MPE, Vangelis Foskolosthe decline in consumption intensifies and it is estimated that throughout the month it will be reduced in volume, while the value of sales will be increased, mainly due to price increases in several product categories.

It is noteworthy, according to him, that most businesses started the new year with a positive mindset, hoping that they will not have to proceed with new price increases, despite the fact that operating costs remain high. They hold prices down to a great extent, continue unabated with promotions while participating in the ministry’s initiative for the household basket for the benefit of the end consumer.

According to him, the shopping card (Market Pass) is expected to give a significant boost to the market and to strengthen the course of the sales volume “The approximately 650 million euros of the shopping card (Market Pass) action is more than 5% of the total annual turnover of the supermarkets, so it is estimated that the implementation of the measure will give a big boost to the sales of organized retail”, he emphasizes.

Focusing on the profile of the Greek consumer and the new shopping habits he has adopted, Mr. Foskolos points out that he is restrained in his purchases and knows in advance how he will behave in the supermarket. In fact, he searches for offers, checks quality, compares prices and quantities and makes targeted purchases. “The economic crisis and the coronavirus pandemic have fundamentally changed consumer buying behavior and combined with reduced disposable income and increased costs of meeting basic needs is readjusting the final shopping list with the scales tipping towards private label products as well as those which are sold under tenders” he emphasizes.

Private label products are gaining ground

It is noteworthy that private label products continue to be a popular category for consumers and are becoming a determining factor for the turnover of supermarkets. According to data from research firm IRI, in 2022 the share of private label products remained high at 16.3%, with category sales increasing by 16.4% compared to 2021.

As the decrease in disposable income combined with inflationary pressures favor the category of private goods, the strategic retail analyst, Konstantinos Macheiras speaking to APE-MPE points out that a big challenge for businesses is to maintain shares in an environment where the competition between brands and private label will intensify further. As he explains, “the ‘household basket’ may have achieved its goal of holding down prices, but it has created a sharp competition between retailers and suppliers of non-basket products. There the price competition is much more intense.”

Focusing on the revaluation of products, he estimates that there is a de-escalation and predicts that until April there will continue to be small adjustments in food of the order of 2% to 3% which will be much more easily absorbed by the Greek retail trade.

Regarding the turnover in organized retail this year, he points out that “an increase in sales volume can be recorded from May onwards mainly in regional markets, in islands and holiday centers and in cash carry, due to the start of the tourist season. This fact will help smooth the path towards normality, which we expect towards the end of 2023 and the beginning of 2024, if we don’t have any other surprises”, says Mr. Macheiras.

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