Inflation is on the rise. That's why four out of five German residents have recently started comparing prices more frequently. And three in ten are buying planned purchases in advance because they fear soaring prices. That’s what was revealed by a broad GfK survey carried out for the online retailer Galaxus. But inflation has yet to hit hard – at least where online retail is concerned.
Increasingly frequent price comparisons and panic buying
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Inflation is when you pay 30 euros for a 20-euro haircut you got for 15 euros when you still had hair. After almost three decades of stable prices, Germany is experiencing a change in tide. Inflation is back in town. On behalf of Galaxus, market researcher GfK asked 1,010 German residents how much prices will climb this year in the country. Almost two out of three respondents expect inflation to exceed five percent. Around a quarter expect inflation to be between two and five percent.
The older generations especially expect higher inflation: three quarters of over-70s and eight out of ten over-80s expect inflation to exceed five percent this year. No wonder, given that they remember the impact of high inflation in the 1970s and 1990s (article in German). By contrast, only one in two of the 30-39 age group expects inflation to exceed five percent and only 43 percent of the 18-29 age group believe that it will. In comparison, economists at the ifo Institute expect inflation to average 6.8 percent by the end of the year. For June, the Federal Statistical Office calculated a year-on-year inflation rate of 7.6 percent.
And according to the survey, higher earners expect higher inflation rates than lower earners. But inflation tends to hit lower earners harder than average because heating oil, gas, gasoline and diesel account for a larger share of their household budgets. The study also reveals differences in expectations between East and West. For instance, 74.3 percent of residents living in the eastern Bundesländer expect high inflation. But in North Rhine-Westphalia, Bavaria and Hamburg, it’s only 61.2 percent.
Four out of five people in Germany are now comparing prices more often because of inflation. They pay more attention to prices when filling up the tank, search harder for the cheapest flight and visit tons of sites before finally finding those diapers at a discounted price. It appears income also plays a role, albeit slight, when it comes to who compares prices more often. More than 80 percent of low-income earners with a monthly household income of less than 3,000 euros now compare prices more frequently. But fewer top earners with a monthly income of over 5,000 euros appear concerned about the inflation rate since a quarter of these earners don’t compare prices more often than usual.
Although brooding inflation means shoppers fear prices will rise, online shoppers have been spared sharp price increases. «Prices for toothbrushes, cat food and cell phones are so dynamic and easy to compare online that retailers can’t easily pass the higher prices on to their customers directly», says Hendrik Blijdenstein, who’s in charge of purchases and sales as Chief Commercial Officer at Galaxus. «If a retailer still tried to pull this off, they’d be left with an untouched storeroom of goods.» One exception, however, is hard-to-get products. That’s why there has been a stark price increase in recent months for graphics cards and game consoles. Galaxus.de is the only retailer in the world to display the price trends of all its products, thereby helping customers to make smarter purchases (more information on price transparency).
The GfK and Galaxus survey also shows that in some cases, inflation is causing panic buying. More than a quarter of individuals are now buying planned purchases sooner for fear that prices will continue to rise. But younger people are apparently more susceptible to acting on their fears since a third of younger people are shopping in advance but only a fifth of older people are. What’s the thought process here? It goes like this: if the sofa I want costs 400 euros today, it’ll probably cost 450 euros by year’s end, so I should buy it now rather than later.
Not only did GfK conduct the survey in Germany, but it asked more than 1,000 people in Switzerland and also in Austria for their input. Among the Swiss, more than half of the population expects inflation to reach between two and five percent. In Austria, a whopping 70 percent expect inflation to surpass five percent. Here you can see the Swiss results.
