Retailers Get Ready for Thrifty Shift Among Shoppers

by Mark Friedman  on Monday, Aug. 1, 2011 12:00 am  

Eileen Sotomora of Little Rock, with daughter, Charli, said she searches the Internet to find deals on everything from plane tickets to shoes.

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Arkansans and consumers around the country have become more frugal, said Michael Pakko, chief economist for the Institute for Economic Advancement at the University of Arkansas at Little Rock.

Pakko said that in 2008 when gas prices were climbing to $4 a gallon, people complained but paid it.

But when gas prices rose in 2011, Arkansans balked at the price, he said.

“More recently people are finding ways to cut back on their gasoline,” Pakko said.

Before the recession, Arkansans spent about 6 percent of their income on groceries. During the recession, it increased to 10 percent, which suggests consumers were cutting back on other items, Pakko said. Or it could suggest that people had less income and were spending the same amount on groceries out of a smaller take home paycheck.

Even though the recession officially ended in September 2009, “consumers remain skeptical and uncertain,” Booz & Co. said in its October report.

In Arkansas, groceries still account for 10 percent of all sales that are subject to the sales tax, Pakko said.

Pakko said he’s not sure what Arkansans are doing with their money that once was spent on other taxable items. He thinks they are putting more money into savings or paying off bills.

Or it could mean that people are buying more groceries instead of going out to eat. Polly Martin, the president of the Arkansas Grocers & Retail Merchants Association, said her grocery members have noticed that families are buying more of the staple items and cooking at home instead of going out to eat. She also said members have reported that prepared food or ready-to-bake items at grocery stores have been a hit with single consumers so they too don’t have to go out to eat.

“The overall trends are that the recession and the habits that got formed during the recession are here to stay,” Kasturi Rangan, a principal of Booz & Co., told Arkansas Business.

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