Retailers bet on loyalty. Shoppers chase lowest price

As inflation continues to squeeze household budgets, a new study from Rakuten showed a growing disconnect between what shoppers want and what retailers expect.

More than half of consumers told the study that they plan to prioritize the lowest prices when shopping this year — but only five per cent of retailers believe shoppers will actually trade down to cheaper, lower-quality brands.

At last AAPEX, Nathan Shipley, executive director and industry analyst with Circana’s automotive aftermarket practice, noted that aftermarket customers are looking to delay maintenance and buy lower quality items to save money. Tires topped the list, followed by cleaning products, appearance chemicals, wipers and motor oil.

A gap in perception could cost retailers if they don’t adjust their strategies fast, an expert warned.

“Consumers are looking for value, but the cost of doing business is increasing for retailers,” said Julie Van Ullen, chief revenue officer at Rakuten Rewards. “Retailers cannot assume that shopper loyalty will remain intact if they choose to pass the added costs onto the consumer by raising prices.”

Shoppers are feeling the pinch

The study found that 19 per cent of shoppers say they can’t afford to pay their household bills while 17 per cent can’t afford basic necessities like food and gas. A little more than a third (36 per cent) say they can afford both essentials and non-essentials and 28 per cent say they’ve cut out personal purchases like clothing and electronics.Two in five (41 per cent) plan to shop less than in previous years.

Are retailers too optimistic?

Despite the financial strain on shoppers, 73 per cent of retailers believe they’ll hit their sales targets for the first half of 2025. That confidence is backed by bigger marketing budgets — 67 per cent of retailers say they’re spending more on marketing this year.

But where that money is going may not align with shopper behaviour. Most retailers are still focused on brand awareness, with 83 per cent prioritizing social media, 65 per cent on search and 50 per cent on display ads.