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Stores like Trader Joe's and Walmart 'can push prices up' now without shoppers blaming them — finance prof explains why

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Key Points
  • Grocery prices are up 10% over last year, according to recent BLS data.
  • Focus on inflation from news outlets actually makes it easier for stores to hike prices without shoppers protesting or taking their business elsewhere.
  • "Prices are increasing all around consumers, so this idea of punishing the retailer for increasing prices is not there," one expert says.

Grocery prices in March were 10% higher than they were during the same month last year, according to data from the Bureau of Labor Statistics. And everyone's talking about it. Inflation is the number one economic concern for voters, according to a recent Gallup poll.

Focus on inflation from news outlets actually makes it easier for stores to hike up prices without consumers retaliating or taking their business elsewhere, says Francesco D'Acunta, assistant professor of finance at Boston College who co-authored the paper "How Grocery Prices Influence Consumers' Inflation Expectations."

"Often, retailers don't increase prices in times when inflation is not very high as those prices would be evident to the consumer," he says. "When inflation is substantial, that is when retailers can push prices up."

'Prices are increasing all around consumers'

Grow sent its reporters out to shop for a basket of 13 kitchen staples in the suburbs of New York, Chicago, and Los Angeles, at four national grocers: Aldi, Target, Trader Joe's, and Walmart. One of those staples was a dozen eggs, an item consumers link most strongly to inflation, says D'Acunta, along with milk.

Walmart had the most expensive eggs in each city — even pricier than Trader Joe's, which was the most expensive grocer across the board.

For a retailer that touts low prices, dramatically increasing the price of "one of the two goods most visible to everybody," D'Acunta says, might seem like an odd choice. But at a time when consumers are braced for soaring prices, they might chalk up the higher price point to inflation and be less likely to shop around or fault the retailer.

"Prices are increasing all around consumers, so this idea of punishing the retailer for increasing prices is not there," D'Acunta says.

Cost spikes might vary city to city

Not all cities are affected by inflation to the same degree, says Zain Akbari, an equity analyst at Morningstar: "The impact of inflation does not seem to be uniform nationally."

More affluent areas often have higher grocery prices, Akbari says: "Higher wage markets feature customers that are a bit better suited to absorb higher prices, which also plays a bit of a role in retailers' ability to move stickers higher."

The distance a store is from a distribution center, or how congested a city is, can affect prices. Retailers need gas to transport goods via trucks and fuel prices were 18.5% higher this March than they were the previous one.

The more money a retailer has to spend on gas for its trucks, whether because its drivers must transport groceries a longer distance or sit in traffic for a longer period of time, the higher the price of goods.

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