Customer reviews on Yelp reporting higher prices on goods and services surged to a record, pointing to an elevated number of consumers who feel the strain of rising inflation in their interactions with local businesses. But sentiment didn't appear to deter consumers from wanting to spend money at local establishments.
According to data from Yelp, reviews mentioning price increases at mom-and-pop operations reached a five-year peak in the fourth quarter of 2021. In its analysis of specific mentions of terms related to inflationary experiences such as “more expensive” or “used to be cheaper” against disinflationary language like “reasonably priced” in user write-ups, Yelp found reports of rising costs ticking higher between 2015-2021 — reaching a record high at the end of last year.
Yelp indicated in its report that the rising price levels in headline inflation readings have been reflected in review sentiment on the platform. The Bureau of Labor Statistics' latest print on the Consumer Price Index (CPI) showed prices rose at a 7.0% year-over-year clip in December 2021, marking the fastest increase since 1982.
The crowdsourcing business reported inflationary sentiment among reviewers saw a sharp decrease at the onset of the pandemic during the second quarter of 2020 but jumped back quickly to pre-pandemic levels by the following quarter. In 2021, the number of reviews detailing price increases soared 29% in the final three months of last year from the fourth quarter in 2020.
Still, despite the higher inflationary sentiment among reviews, data from Yelp suggested the greater awareness of increasing prices did not appear to take a toll on consumer spending habits. User searches for higher priced businesses on the website in 2021 compared to pre-pandemic searches (2019) rose sharply.
Business designated “$$$$,” the highest price point on Yelp saw an increase in searches of 56% last year from 2019, and searches for those in one tier below at the “$$$” mark were up by 31%. By contrast, searches for “$” and “$$” businesses were fewer, posting declines of 24% and 8%, respectively, in the same time period.
Yelp collects data quarterly on how consumer behavior and local business activity are evolving, but chose to focus part of its analysis on the inflation experience on Yelp to underscore the impact economic activity has on the lives of everyday consumers, particularly those spending money at small and local businesses, according Yelp data science leader Pria Mudan.
“It is interesting to see the increase in consumer searches for higher priced businesses while consumers are also mentioning rising prices in their reviews,” Mudan said.
She added that because the data reflects consumer behavior, not consumer intent, Yelp cannot explain the jump in searches for higher-priced businesses but pointed out the findings are in line with the the broader overall increase in consumer spending in the U.S.
“We also know that restrictions prevented many from dining out, and as they have lifted, this data may support the notion that people are willing to spend more on a nice night out after a year of cooking at home and ordering in,” Mudan said.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc