Osorno is a city and central point to get around in the Region de Los Lagos. The prices for accommodation and groceries are immensly high but typical for this region of Chile. I'd compare them to prices in Europe. It will be hard to find a place to stay under 20$ but is worth it when travelling through the otherwise remote region. You'll find everything you need here and cheap mini-buses leave in every direction. They call Osorno the "City of 100km" because you can reach almost every distinct territory of Chile within 100km. Here is some advice for staying in the city.
Accomodation
A great hostel to stay is "Hostal Chaman". It is immaticulatly clean, has hot water and a big kitchen to use. Also the terrasse with fast wifi access is a nice place to lay back and catch up on daily chores.
Sight Seeing and City History
If you want to get to know the city and it's history a bit, visit the museo of Fuerte Reina Luisa and the cathedral at the Plaza de Armas. Also, if you have spare time, take a walk to Parque Pleistocénico. It is interesting and there usually is a market close by that sells local goods.
Groceries
Shopping for groceries is best done by visiting the different supermarkets and comparing current sales. The three big supermarkets are Unimarc, Lider, and Jumbo. Alternitavles, get vegetables and Fruits from the people selling on the street. Most is organic and costs less than in the supermarkets. The only supermarket I came across that wass a bit cheaper than the others is "Cugat" just across from the main bus terminal.
Camping / Trekking Gear
Shopping for camping ant trekking gear is also best done in the mall. The shops are rather expensive, but you'll find quality gear.
Clothes
If you need new clothes, you'll find that the street "Lynch" is a great place. There are lots of small establishments selling second hand clothes in good state. Most is designer wear imported from Europe.
Buses
Before going to the main bus terminal, check if there are mini-buses leaving in the intended direction across the street of the terminal. they cost less and most trips will take under two hours in every direction. It doesn't matter if you are carrying a lot of luggage, they can store them in the back compartement.
Drinks and Socializing
A great place to enjoy a coffee ore beer is the "Cafe de Nuit". The sound is great and it's in the center of town. Plus the staff is really friendly and you have a good wifi connection.