JKU Study: Inflation Continues to Control Consumer Behavior

According to Statistics Austria, inflation dropped in March, but consumers have not yet responded accordingly.

Professor Christoph Teller
Professor Christoph Teller

According to a recent survey conducted by the JKU’s Institute for Retail, Sales and Marketing (IHaM), price increases continue to negatively impact the Austrians’ consumer behavior and consumers have not yet responded to the declining rate of inflation. Although recovering slowly, consumer confidence continues to be very negative.

The most recent IHaM long-term analysis confirms an ongoing reluctance to spend money in the retail sector. Across all three survey cycles (April 2022, September 2022, and April 2023), 30% of the adult population stated that on account of higher retail prices, they have been buying fewer goods. The reluctance to spend money has been ongoing for an entire year with no end in sight. Three quarters of consumers expect retail prices to continue to rise over the next three months and consumer attitudes are generally known to influence consumer behavior.

Sales Continue to be Popular
When shopping, 75% of Austrians (age 18+) continue to pay greater attention to sales and promotions. The same applied to 75% of adults in April 2022; only in September 2022 did the proportion briefly fall to 68%. 59% are currently buying cheaper retail products (such as store brands), the same proportion as in April 2022. Albeit slight, there has, however, been a decline compared to peak numbers in September 2022 (64%).

Online Research Helps Only to a Limited Extent
Consumers' initial fallback strategy to mitigate price hikes by looking online became almost obsolete six months after prices began to rise. While 43% of consumers continued to search for lower-priced products online in April 2022, the figure dropped to 28% by September 2022, and the figure remained fairly stable in April 2023 (29%).
On a smaller scale, the same applies to a rise in online shopping. While 20% of Austrians were still trying to counter inflation by ordering more online in April 2022, this figure had dropped to "only" 17% by April 2023 as online retailers have also had to begin factoring rising costs into their price calculations.

Options to Save on Purchases are Limited
Only 15% of adult Austrians would like to - or can - cut back on spending in order to avoid having to save on their purchases. This compares to 16% in September 2022, and 11% in April 2022. Only 8% of consumers indicated that they would consider using their savings to shop. This means that the current share is roughly at the same level as six months ago (11%), and a year ago (9%). 4% would actually even be willing to overdraw their bank account in order to make retail purchases. Again, over time, there have been fewer (major) changes.

Dr. Ernst Gittenberger summarized the IHaM’s current analysis findings: "The IHaM’s most recent long-term analysis confirms that there is a continuing consumer reluctance to shop which is in line with the theme ‘the same procedure as last year’. In regard to consumer behavior, the survey indicators show little change between April 2022 and April 2023 and that is not good news. Austrians continue to be affected by inflation and it impacts their consumer behavior. For the time being, there doesn’t seem to be an end in sight."

Prof. Dr. Christoph Teller, head of IHaM, describes the difficult situation retail companies face: "The retail sector is in a bind. On one hand, retailers are trying to counteract the negative consumer sentiment by offering sales, promotions, and cheaper products. On the other hand, low margins coupled with high and rising costs make it fairly impossible to generally forego price increases. When shopping on a daily basis, consumers increasingly consider the non-discounted standard product price to be more of a luxury item. In the retail sector, special offers and extensive product discounting are increasingly becoming the 'new normal'. It can be like a drug for consumers, creating a quick ‘high’ but in the long-term, it becomes a hard habit to kick. Whether or not retailers and consumers will be able to kick the habit remains to be seen once the crisis is over."