Angry shoppers are fighting back against inflation - even the wealthy ones. Companies are feeling it.

MW Angry shoppers are fighting back against inflation - even the wealthy ones. Companies are feeling it.

By Venessa Wong

'Let's stop buying from these jokers,' one consumer said. 'I bet they reduce these prices real quick.'

"People stop inflation not the government," a Reddit user posted last week - along with a photo of a $17.05 receipt from McDonald's for a breakfast meal with hotcakes and a sausage-egg-and-cheese bagel meal, including a $1.19 upcharge for orange juice.

"Let's stop buying from these jokers," they wrote. "I bet they reduce these prices real quick."

From fast food to alcohol to beauty products, frustrated people on social media are sharing things they've recently stopped buying in response to rising costs that they can no longer tolerate - including some who hope reducing demand by abstaining or trading down to cheaper products will lower prices. "When we vote with our wallets THE CORPORATIONS LISTEN," another Reddit user said.

Years of dealing with rising prices for everything from food to housing to transportation have finally pushed many consumers over the edge. As household debt and delinquencies rise, people say in surveys that they intend to cut back on nonessential spending. Companies are already feeling the impact.

Retailers including Walmart $(WMT)$, H&M (SE:HM.B), Ikea, Michaels $(APO)$, McDonald's $(MCD)$, Starbucks $(SBUX)$ and even Chuck E. Cheese have been informing investors of the need to focus on value or offer discounts, in order to keep consumers coming through their doors.

Over the past few years, companies have been increasing prices to claw back rising costs and were largely getting away with it. While corporate profits alone are not responsible for inflation, they have grown by 41% since the end of 2019, while prices have gone up 17% in that time, the Wall Street Journal reported last month.

Mike Wilson, chief U.S. equity strategist at Morgan Stanley, recently noted that mentions of "value" by executives during discretionary-goods companies' earnings calls have been historically elevated.

"The consumer is empowered to make changes at retail, but it is certainly coming from continued declining consumer sentiment" as people are "increasingly panicked about their personal financial situation," Chad Lusk, a managing director in the consumer and retail group at the consulting firm Alvarez & Marsal (A&M), told MarketWatch.

Lusk called companies' renewed focus on value "a small victory" for consumers who have needed "some give" in a high-cost environment for some time. "There appears to be some give happening right now," he said.

Low-income consumers are especially sensitive to high prices, but A&M's latest consumer survey found that households across the income spectrum now intend to cut back on spending. Households earning $150,000 to $200,000 reported the highest rates of planning to pare back purchases.

"Those that have been immune to these kinds of economic downturns in the past are now tightening their belts the most," Lusk said. "Lower-income earners have made a lot of these trade-offs already. Now, it's getting to the point where higher earners are saying, 'I have to start doing this now, as well - this has gone on for too long, inflation has been too much, I don't really see things getting better for myself and my family. It's time to make cutbacks.'"

Downbeat consumers across income levels told A&M's researchers that they are preparing for prices to stay high, they believe the U.S. is heading toward a recession, and they don't expect their personal financial situation to improve in the next six months. In this climate, they intend to pull back spending in many areas: jewelry, alcohol, beauty products, electronics, entertainment, sports, prepared food, shoes, apparel and home improvement. Meanwhile, they said they expect to spend more on necessities like groceries and personal-care items.

In other words, Lusk said, "this curtailing of spend is definitely a necessity-driven exercise." He added that many also want to increase their savings, following a decline in people's ability to save in recent years. The personal-savings rate, which measures the share of income that households save after covering expenses, fell to 3.2% in March, down from 5.2% the previous year.

Saving money appears to be a growing priority for many people. In an American Express $(AXP)$ survey from October, growing savings was the No. 1 financial goal (59%) for millennials and Gen Z in 2024, followed by paying off debt (42%) and sticking to a budget (41%). Consumers who intend to do a "no-spend" or low-spend year, in which they only buy essentials, also told Intuit Credit Karma $(INTU)$ that building savings was their top reason.

As goods and services have been getting more expensive for some time - as well as interest rates - what will be attractive to most people is "value for money [and] feeling like they got the best price," said Steve Rogers, managing director of Deloitte's consumer industry center.

Deloitte found that many people plan to cut back on most discretionary spending over the next month and want to increase their savings, with the exception of travel. After a prolonged period of limited travel while buying goods and home furnishings during the pandemic, people with an extra dollar are now thinking, "I can go on that trip or put that extra dollar in the savings account," Rogers said. "How many air fryers do I need?"

Still, he said that because of tariffs and other costs that go into the price of goods, it's not likely that consumers will see prices drop down to prepandemic levels, even if that's what many people consider to be the last period of "normal" pricing.

"I don't think we're going to see 2019 prices, but it will be interesting to see how much retailers and some [consumer packaged-goods] companies can move to spur that volume," Rogers said. "All American consumers love a deal. I don't care what income bracket you're in."

How have higher prices affected your life and how you think about the U.S. economy? How have you reacted to higher prices? Let us know at readerstories@marketwatch.com. One of our reporters might reach out to you to learn more.

-Venessa Wong

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May 11, 2024 07:01 ET (11:01 GMT)

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