Inflation has caused prices to spiral out of control for many Americans. Businesses are facing increased expenses from the supply chain, and they have passed those rising costs onto consumers. For the past two years customers have been accepting of this price increase, yet we have now reached the breaking point. Shoppers are pushing back, and the onus now rests with companies. Do they relent and eat the higher costs or hope that customers will be more understanding?

Restaurants are one of the most prominent industries to suffer during this balancing act. Most restaurants have low margins, and they rely on high volume for profit. For many, that relationship has shifted, and they are reporting improved revenue at the cost of losing traffic. While the higher profits look good in a quarterly earnings report, it has not proven to be a sustainable practice. After multiple quarters of price hikes, some restaurants are slowing down and even backtracking. Chipotle and Noodles & Company are two such restaurants who have faced pushback from consumers and have recently re-evaluated their pricing. These two restaurants, plus many others, have reversed course in their decisions and have attempted to bring additional value to their menus. Others, like The Cheesecake Factory, plan to continue to raise prices to offset falling traffic. When you factor in additional service fees to cover things like employee health benefits, checks have never been higher.

The picture isn’t much rosier for retailers and grocery stores when it comes to sticker shock. Prices on everyday goods and luxury items continue to go up and shoppers only have so much patience. Inflation could be partially to blame, yet it can not be the sole culprit. Unlike restaurants, retailers offer items that are considered more essential and thus they have more wiggle room with price points. Of course, this will eventually reach a breaking point with customers as well. We have seen spending fluctuate from month to month and people are still reluctant to return to their pre-pandemic buying habits. Companies have been able to eke out profits so far, yet we could see some true ramifications this holiday season. Businesses are counting on a shopping rush to offset losses like what has happened in the last two years. Pending the recent slowdown at the Panama Canal, there have been no real supply chain issues, and most stores are operating normally, which should pave the way for big revenue. In reality, we could see a reluctance to spend in November and a quiet holiday season. According to CSG’s Consumer Spending Report, 2022’s “November spike” in holiday spending fell flat with little to no growth, where inflation was cited as the underlying cause for undershooting all projections.

We cannot expect prices to ever return to 2019 levels, yet the rate at which they are increasing is unsustainable. Companies need customers to return to old buying habits and these new pricing structures have not done the job. For restaurants and retailers alike, there needs to be value added to lure new and old customers in without them feeling like they are getting ripped off. We have already seen these strategies being deployed and they will need to pick up the pace. The holiday season will not always bail out poor strategy and this may be the year where consumers say that they have had enough.