Some Asda shoppers are setting limits of £30 at checkouts and pumps, the supermarket chairman has said.
Customers are putting less in their shopping baskets, shifting to budget areas and worrying about the future, said Lord Stuart Rose.
“What we are seeing is a massive change in behavior,” he told the BBC.
It comes after food and fuel costs have soared in the UK. Inflation — the rate at which prices are rising — hit a 40-year high of 9% in April.
Lord Rose said he saw the rise in inflation last year coming like a “train coming through a tunnel with a big flashing light on top”. Now it’s time to “buckle our seat belts,” he said.
“People are acting back. They’re worried about spending,” he said. “They also have a limit that they set. They say 30 pounds is a limit… and if they hit over 30 pounds, that’s the end. The same goes for petrol.”
Lord Rose said the country was facing very difficult times and urged the government to do more to help low-income households.
But the Treasury said it understood people were struggling as prices rose and it paid £1,200 of living expenses to those on the lowest incomes.
Lord Rose also addressed Government concerns that supermarkets did not pass on the 5p per liter fuel tax cut in March, and insisted price changes were “made on the same day” by Asda.
The retail veteran has around 50 years of industry experience. He recalled the runaway inflation in the 1970s and said that this price hike came as a very nasty surprise to consumers.
“I belong to the generation that remembers what it was like last time. And once [inflation] it’s quite harmful,” he said.
“And it takes a long time to eradicate them… We run the risk of being in a place from which it is very difficult to extricate ourselves.
“What’s rather sad is that the country, the government, maybe the Bank of England didn’t see inflation coming quickly. They have now recognized that.”
- Why are prices rising so fast?
Asda has been tracking disposable income since the financial crisis of 2008 and is all too aware of the pressure on consumers.
The latest data shows that in May households had an average of £44 less a week of discretionary income than a year ago – a drop of almost 18%. This is the amount of money left after taxes and major bills are deducted, and it’s the third straight month that disposable income has fallen to record levels.
Like other supermarkets, Asda has to grapple with its own rising costs and decide how much of it to absorb and how much to pass on to shoppers.
All major grocers are struggling to keep prices on the most popular everyday items as low as possible because they know customers will be voting with their feet and browsing.
The UK’s third-largest grocer has added a new range, Just Essentials, to its budget groceries range, which includes around 300 products.
It also launched Dropped and Locked, an initiative to drop prices on 100 items and keep them at the same price for the rest of the year.
“We’re doing everything we can. We’ve invested around £100m in the last month to ensure customers get what they need at very, very competitive prices to help them,” said Lord Rose.
But will it be enough? Asda has fared less well than its peers lately.
Lord Rose said he’s not overly concerned about market share in the short to medium term.
“It’s a little bit up and a little bit down, you’re going to see the monthly changes and it’s always been like that in retail… We’re going to do what we have to do to take care of our customers,” he said.
“Secondly, because we’ve had a change of ownership – my colleagues and I took over the business just a year ago – we’re doing things that we believe will have an impact on the long-term viability of the business and provide customers with a better Asda. ”
The Asda chairman and former M&S boss said he doesn’t want to predict where food prices will end up by the end of the year but would like more government support for those most in need.
“I would urge them to do more for the people at the bottom of the income spectrum,” he said. He suggested that a VAT cut or other reduction in fuel taxes would be “helpful”.
He acknowledged the government now has a difficult balancing act between managing rising prices without sacrificing economic growth. But he knows what he would do.
“I would say the number one priority in the short term is to stop inflation because once inflation is embedded it is very, very difficult to stop. If that means slowing down the economy for a while, and it looks like we’re headed for a recession, then so be it.”
A government spokesman said its €37 billion support package
It said people on Universal Credit would keep £1,000 more of what they earn and a 5p cut in fuel tax would save a typical family £100.
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