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03/07/2023

Retailers will face hurdles meeting low-income customers after cuts to SNAP

Essential retailers must implement creative solutions to drive engagement with lower-income consumers, who have been most impacted by recent economic pressures.
Elizabeth Lafontaine
Chief Retail Analyst, Retail Leader
Elizabeth Lafontaine profile picture

Why it means: Emergency COVID-19 pandemic-born SNAP benefits ended across the U.S. in February, leaving recipients with even fewer dollars to spend across essential retail channels. Beyond the immediate financial impact to retailers, the changes in benefits limit their ability to connect with lower-income consumers and build loyalty.

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SNAP benefits

This year promises economic uncertainty for all consumer groups, but especially for those in lower-income households. With many pandemic-era assistance programs being sunset this year, consumers are more vulnerable financially than in the last three years. Congress passed a law late last year that ended emergency Supplemental Nutrition Assistance Program (SNAP) benefits, halting the program in states and territories that continued to use it as of February.

According to the Center on Budget and Policy Priorities, the average SNAP recipient will receive $90 less per month than with the emergency benefits, while groups that have slightly higher incomes may see up to a $250 monthly decrease in assistance. According to the U.S. Department of Agriculture, about 41 million people currently receive SNAP benefits, and residents of 32 states and 3 territories still received emergency assistance through last month. 

Lower-income consumers continue to face even steeper financial pressures due to inflationary price increases and reduced aid. This leaves already financially stretched households with fewer dollars to spend on essential retail goods and services, which not only impacts consumer spending but also the retailers that service their purchases. SNAP benefits can be used across grocery, warehouse, convenience and drug sectors, as well as other specialty food stores. The negative financial impact of fewer benefit dollars will be shared across these sectors, which quickly adds up. 

Beyond the financial impact to retailers, the changes in benefits limit their ability to connect with lower-income consumers and build loyalty. Lower-income consumers grew their retail spending during the pandemic, in part due to stimulus injections and extra assistance benefits, relieving some of the pressure of lower spending by other income cohorts. Reaching this consumer group is still an important piece of the retail equation, and brands cannot lose sight of the changes impacting low-income shoppers and must mitigate higher prices where possible.

Despite the perceived economic headwinds, particularly for those in lower-income households, retailers are investing in solutions to make shopping more efficient for SNAP recipients. Retailers can and must provide value through other avenues, especially to those most vulnerable. Wegmans recently added the ability for participants to use SNAP benefits when shopping through e-commerce and has also installed features like healthy eating online recommendations and three free grocery deliveries for SNAP recipients. Making online grocery delivery cost-effective and seamless for SNAP participants, both in first-party retail sites and third-party delivery services, can boost the value of benefits and create a better retail experience for all demographics of shoppers. 

Retailers can also boost usage and loyalty through educating consumers on expanded offerings, nutritious and fresh options, and recipes and ingredient lists using SNAP-approved items to aid in creating a positive experience for those who are enrolled in the program. Grocery shopping should be a joyful experience no matter the consumer’s circumstances, and as lower income consumers face mourning pressures, retailers can alleviate some of that stress.

What’s next: Retailers must implement creative solutions to drive engagement with lower-income consumers, who have been most impacted by recent economic pressures and are often overlooked in favor of higher-income shoppers. Some retailers are testing online grocery delivery for SNAP recipients and adding resources to make online shopping more advantageous and educational. Focusing on the joy of grocery shopping and alleviating some of the daily stress of low-income shoppers can help retailers connect with consumers, build loyalty and ultimately be better public servants for communities.