The current economic climate, coupled with continuing recovery from the Covid-19 pandemic, have reshaped the way that consumers are buying their food. At the center of this are conversations about food access, costs, and consumer preferences that lead to one important conclusion – discount grocery stores are more important now than they’ve ever been before.
More specifically, the mission of many discount food stores, and the benefits that they provide to the communities they serve, are essential. Discount and closeout stores provide essential food, hygiene and healthcare items to an increasingly vulnerable population who either can’t afford or can’t get to traditional grocery stores. Let’s take a closer look at a few of the reasons why community members are relying on discount stores more and more.
It’s a tough time for most American shoppers. A full 64% of American households are now living paycheck to paycheck, meaning that they’re being cost-conscious at every opportunity and looking for ways to save on essentials. As a result, 89% of consumers – or over 200 million people – now shop at discount stores on a regular basis.
Covid-19 is an obvious cause for much of the economic insecurity we’re seeing now. In fact, 31% of people surveyed by Michigan State University said that they’re facing new food insecurity challenges due to the pandemic.
For those who were put out of work, those who lost family members who provided for their households, and those who face increased medical expenses, incomes and budgets are less stable and more difficult to manage. Pair that with supply chain issues that have created on-and-off shortages and increased prices, and you’ve got a recipe for disaster.
If you’ve seen any news source in the past six months, you’re probably already well aware that the United States is facing the highest inflation in decades. March came with an 8.5% annual inflation rate, the highest since 1981. And food is being hit even harder.
March saw an annual consumer price index (CPI) increase of 8.8% annually, up from 8.5% in February. As a result, the same people who are facing more income challenges are also paying more for necessary goods.
More need for assistance
This increased gap between earnings and prices isn’t just anecdotal, either. By looking at food assistance programs like the Supplemental Nutrition Assistance Program (SNAP), we can clearly see the increased need among Americans.
In 2020, the total of SNAP payments nationwide was $85.6 billion. That was up significantly from $60 billion in 2019. Of course, much of this may have been due to the spike in unemployment claims as workplaces were shut down at the peak of the pandemic. The numbers aren’t yet available for 2021, but don’t expect them to drop back to 2019 levels. In fact, the Biden administration increased monthly SNAP payments by about 25% in October, bringing an estimated $6 billion in added assistance.
Clearly the need for more affordable food is a continuing concern for shoppers.
A simultaneous shift in consumer behavior and opinions is starting to put an emphasis on the other half of discount grocers’ mission. In addition to providing affordable food to the people who need it, these stores are also minimizing waste by selling food that would otherwise have ended up in landfills.
The impacts of food production and waste on the climate are well documented. About 30-40% of food in the United States goes to waste. Project Drawdown ranks reducing food waste as the number one way to curb climate change. This isn’t particularly new.
More recently, a recent report from the Intergovernmental Panel on Climate Change (IPCC) further emphasized the role that food plays in climate change. It not only pointed to the harmful greenhouse gasses emitted by food that rots in landfills, but also the energy, fertilizers, water, and other resources that go into producing the food, only for it to be thrown away.
By selling much of the food that would otherwise be destroyed, closeout stores are helping to mitigate these impacts.
Shoppers are increasingly aware of the climate impacts of consumerism and waste, and food is no exception. In fact, it’s led to some surprising statistics. In one recent survey, 63% of consumers said that they would be more compelled to shop at a store committed to reducing food waste.
As consumers continue this shift and brand perception becomes even more important, discount stores will benefit from their mission to reduce waste. At the same time, food manufacturers who have robust waste reduction programs with closeouts at the center will also see increased brand perception, making discount retailers a key element of their strategies.
A need reflected in growth
The increase in consumer needs, as well as the growing urgency for climate action, are clearly reflected in the recent growth of closeout and discount stores. In 2021, the discount segment accounted for nearly half of all new stores.
In addition, more and more discount stores are adding grocery sections, including refrigerated, frozen, and fresh foods sections. Dollar General, for example, recently reached 2,000 locations selling fresh produce, with a long-term target of 10,000.
This success is a clear response to the increase in consumer demand, and the ability of closeouts to help meet some of that demand – and mitigate some of the largest challenges facing the American public today – is essential.
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