Pushing Back on Inflation: Some Shoppers Reject Higher Prices

Summary

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WSJ Your Money Briefing: Pushing Back on Inflation – Some Shoppers Reject Higher Prices

Date: March 18, 2022
Host: Trinean Arie (for The Wall Street Journal)
Guest: Suzanne Kapner (WSJ Retail Industry Reporter)

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Episode Overview

This episode explores how American consumers are reacting to ongoing inflation, particularly at a 40-year high. After a long stretch in which companies could raise prices with little consumer resistance, new signs are emerging that shoppers are beginning to push back, especially on everyday items. Host Trinean Arie interviews WSJ's retail reporter Suzanne Kapner to unpack where, how, and why shoppers are rejecting higher prices—and how retailers are adapting.

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Key Discussion Points & Insights

1. Changing Consumer Behavior Amid High Inflation

• Pockets of Resistance: While inflation continues to drive prices up for a wide variety of goods—especially essentials like gas and groceries—consumers are starting to become pickier about what they’ll pay more for.
• Disposable Income Squeeze: Higher costs for essentials are eating into budgets, making consumers more selective about discretionary purchases.

  "Gas prices are at an all-time high. A lot of...food and staples are way up. And that's just eating into the disposable income that shoppers have."
  —Suzanne Kapner (01:07)

2. Where Consumers Are (and Aren’t) Willing to Pay More

• Everyday Items Face More Pushback: Basic goods like T-shirts are seeing notable price resistance.
  • Example: Bella Doll, a clothing maker, tried to raise T-shirt prices by $20, leading to a steep drop in sales and a quick reversal of the price hike. (03:43)
  • More premium or differentiated items (e.g., jogger pants, higher-end sofas) see less resistance.
• Luxury Brands Hold Steady: Upscale brands like Chanel and Coach continue raising prices without losing demand, often pairing price hikes with quality upgrades.

  "Certainly Chanel and other luxury brands have been raising prices without any visible collapse in demand."
  —Suzanne Kapner (05:27)

3. Retailers’ Adaptation Strategies

• Splitting Strategies by Income & Product: Higher-end shoppers still absorb moderate price increases, but retailers are facing more resistance at the lower end.
• Cost Cutting Measures: Some brands are lowering manufacturing costs (using thinner fabrics, less expensive production methods) to avoid raising prices or to protect margins when price hikes aren’t tolerated.

  "They're also using less expensive manufacturing techniques. One brand is... instead of double brushing their fabric... they're only fluffing on the outside."
  —Suzanne Kapner (06:17)

• Building Perceived Value: Premium brands justify higher prices by visibly improving product quality, like using fluffier leather in handbags.

4. The Role of Essentials vs. Discretionary Spending

• Essentials Harder to Avoid: Shoppers can’t easily cut back on food or gas, so those categories consume a bigger share of budgets, squeezing discretionary spending (05:00).
• Trade-Offs by Consumers: Many individuals are buying fewer items (e.g., one new pair of jeans instead of four) or delaying non-essential purchases.

5. Evidence from the Retail Sector

• Slower Retail Sales Growth: Commerce Department data shows slower growth in retail sales, likely influenced by consumers’ renewed caution and the impact of inflation.
• Unit Sales Declining: Higher retail sales numbers are often due to price increases rather than more items being sold.

  "...unit growth is slowing as prices go up. So even though retail sales will show a lift, a lot of that is from the price increase versus people buying more items."
  —Suzanne Kapner (07:40)

6. Who’s Most Affected

• Disparity by Income Level: Lower-income groups are more sensitive to rising prices and scale back spending more significantly.
• Unequal Impact by Product Category: Prices for women’s clothing (like skirts and pants) are rising faster than for men’s, with women more willing—or forced—to pay premiums for newer fashions.

  "Prices are rising for women's apparel much more than for men... women's pants are costing much more than men's pants at the moment."
  —Suzanne Kapner (08:17)

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Memorable Quotes and Notable Moments

• On changing behaviors:
  "For the past year or even slightly longer, companies have been able to raise prices across the board with no pushback. Consumers...have been paying up...but you see...that's just eating into the disposable income that shoppers have."
  —Suzanne Kapner (04:20)

• On buying fewer items:
  "So, they're not totally stopping, but they are maybe buying fewer items."
  —Suzanne Kapner (06:54)

• On brand strategy:
  "What their strategy is to add a little more quality to the product in the hopes that consumers will think it's worth paying up for."
  —Suzanne Kapner (05:27)

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Timestamps for Key Segments

• [01:07] – Inflation impact on essentials and disposable income
• [02:56] – Emerging "price resistance" in basic and lower-priced categories
• [03:43] – Specific examples: T-shirt price hikes meet resistance
• [05:27] – Luxury brands and premium strategies
• [06:17] – Cost-cutting measures by brands facing resistance
• [06:54] – Real-life shopper trade-offs and spending reductions
• [07:40] – Retail sales data: price increases vs. real growth
• [08:17] – Disparities in price sensitivity by income and product category

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Conclusion

This episode paints a nuanced picture of inflation’s shifting impact on U.S. consumers. While essentials are non-negotiable, discretionary purchases are being pared back, with price resistance appearing in select categories. Retailers are responding through both product upgrades and subtle cost reductions, while the wealth disparity continues to shape who can afford to absorb higher prices. The coming months will reveal whether this resistance grows or abates as pressures continue.

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Transcript

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Trinean Arie]

Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition. Here's your money briefing for Friday, March 18th. I'm Trinea Nari for the Wall Street Journal, filling in for J.R. whalen. Whether you're at the grocery store or filling up your gas tank, you've seen them higher prices. Inflation is at a 40 year high as companies pass along increased costs to consumers. Despite some grumbling, shoppers have mostly gone along with it. But now there are signs that some people are pushing back on higher prices.

[Suzanne Kapner]

Gas prices are at an all time high. A lot of, you know, food and staples are way up. And that's just eating into the disposable income that shoppers have.

[Trinean Arie]

So how much is too much? Coming up, we'll hear from our retail industry reporter Suzanne Kapner of about where consumers are and aren't willing to pay more. That's after the break.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it.

[Trinean Arie]

Tell Congress stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition. From food to gas, it seems like higher prices are everywhere and that has more consumers thinking twice before making that big purchase. This week the Commerce Department said retail sales growth slowed in February compared to January. That's a possible sign that inflation is making people more cautious about their money. But where exactly are consumers tightening their budgets and when are they willing to pay more? To find out, I'm joined now by WSJ retail industry reporter Suzanne Kapner. Hi, Suzanne. Thanks for being here.

[Suzanne Kapner]

Thanks for having me.

[Trinean Arie]

Suzanne. During the pandemic, consumers had a lot more disposable income, which helped them meet higher inflation. But you report that recently more people seem to be pushing back on higher prices. What are you hearing from retailers about this?

[Suzanne Kapner]

Well, retailers have said they're seeing sort of select Pockets of price resistance. Typically these are on sort of either lower priced items or basic items like T shirts, you know, whereas, for instance, Macy's tried to raise the price on a sort of entry level sofa by $100 to 599 from 499. Consumers push back on that. But Macy's was able to raise the price of its more expensive sofa from $2,000 to $2,200. And so, you know, the higher end shopper is still kind of willing to pay up, but you're starting to see at the lower end, you know, some price resistance there from shoppers.

[Trinean Arie]

All right, let's dig into that pushback a bit more. What is it about certain items that's making some customers push back on higher prices?

[Suzanne Kapner]

T shirts are a good example, and a company I talked to, Bella Doll, a clothing maker, they tried to raise prices on their T shirts by about $20. And sales went way down. So they had to roll back those price increases. And, you know, part of that is that T shirts are kind of a basic item that you can sort of find them anywhere. And customers tend to be a little more price sensitive. The same company was able to raise prices on their jogger pants. So, you know, it's not across the board, it's just sort of these select pockets. But, you know, it is a bit of a deb from what we had been seeing.

[Trinean Arie]

Yeah, this seems like the opposite of what we've been seeing over the past year.

[Small Business Owner]

Right.

[Suzanne Kapner]

For the past year or even slightly longer, companies have been able to raise prices across the board with no pushback. Consumers, you know, have been paying up. They saved a lot of money during the pandemic. You know, the job market is good, wages are growing, so consumers are feeling pretty healthy right now, which enabled them to spend. But you see, you know, gas prices are at an all time high. A lot of, you know, food and staples are way up. And that's just eating into the disposable income that shoppers have.

[Trinean Arie]

You mentioned food and gas. Those are essentials, of course. Is it harder to push back on price increases for those sorts of things?

[Suzanne Kapner]

Right. I mean, if you need to drive to and from work or, you know, obviously you need to feed yourself or your family, there's going to be a certain amount of your budget that's going to have to go to gas and food and other staples. And as prices for those items rise, it just leaves less for things that are maybe not a necessity, like buying a new dress or a new pair of shoes.

[Trinean Arie]

Got it. So tell me more about the kinds of things where it seems like customers are still willing to pay more at the higher end.

[Suzanne Kapner]

Certainly Chanel and other luxury brands have been raising prices without any visible collapse in demand. And even premium brands like Coach have been raising prices. What their strategy is to add a little more quality to the product in the hopes that consumers will think it's worth paying up for. So their latest version of their tabby handbag, they rolled out last spring, and it's made of sort of a softer, fluffier leather, and they charged $100 more for it. You can really see the difference. You know, if you put the two side by side, it looks like the same bag, except the leather is, you know, looks like a better quality leather. So that's the direction they're taking.

[Trinean Arie]

And what about the other end of the spectrum? In cases where companies find out customers or aren't willing to pay more, how are they reacting?

[Suzanne Kapner]

So they are trying to take costs out by using a lesser grade of leather, thinner cotton, you know, less trim. They're also using less expensive manufacturing techniques. One brand is instead of double brushing their fabric, which meant that rollers would sort of fluff the fibers on both the inside and the outside. They're only fluffing on the outside. So trying to take costs out in a way that won't be too obvious to the consumer.

[Trinean Arie]

Suzanne, you've spoken with some people about their spending habits during the earlier months of the pandemic compared to the last few months. What have they told you about the kind of trade offs they're making?

[Suzanne Kapner]

One woman I spoke with, you know, she had saved up money and budgeted. She planned to update her wardrobe this year. And as she's gone out shopping, she's really had some sticker shock seeing how much things cost. So she had planned to buy four new pairs of jeans. Instead, she's only buying one. She was looking for five new bras. Instead, she bought two. So they're not totally stopping, but they are maybe buying fewer items. Another man I spoke with, you know, he had been spending freely during the pandemic, and this year he planned to buy a new winter coat, but he's holding off on that. He's not buying some new sneakers that he had hoped to purchase. Just he feels like it's time to be a little more frugal.

[Trinean Arie]

This week the Commerce Department said consumers retail spending grew at a much slower pace last month. Is this pushback related to that?

[Suzanne Kapner]

It's a little too soon to tell. But clearly in some categories like food and gas. The rise in spending in those categories were almost all due to inflation. So what we're starting to see is, you know, unit growth is slowing as prices go up. So even though retail sales will show a lift, a lot of that is from the price increase versus people buying more items. We're starting to see some of that, yeah.

[Trinean Arie]

Suzanne, I'm sure these trends aren't hitting everyone exactly the same way. I'm curious to find out who's spending more during this time of high inflation and who's pulling back.

[Suzanne Kapner]

Well, clearly it's hitting the lower income customer more than the wealthier customer. But also, you're seeing the prices are rising for women's apparel much more than for men. And in some instances, that's just driven by demand. Women tend to be more willing to pay up for the latest fashions, but, you know, it's pretty uneven across the board. So the price of women's skirts is way up. The price of pants is not up as much. But, you know, women's pants are costing much more than men's pants at the moment. So there is a lot of disparity across the pricing spectrum.

[Trinean Arie]

All right, that's WSJ retail industry reporter Suzanne Kapner. Suzanne, thanks for joining me.

[Suzanne Kapner]

Thanks so much for having me. I appreciate it.

[Trinean Arie]

And that's your money briefing. I'm Trinean Arie for the Wall Street Journal.

[Small Business Owner]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Retail Industry Advocate]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Retail Industry Advocate]

they need while increasing megastore profits. They deserve it, don't they?

[Trinean Arie]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.