Difficult economic conditions and increasing global unrest drive confidence- and spending- down.
Americans have suffered over a million job cuts annually since January of 2001. Consumer confidence hit a nine-year low in January of 2003. Terrorist attacks and threats of additional attacks – and potentially war – have had a profound effect on the American psyche. Not surprisingly, spending attitudes and behaviors have shifted dramatically as well. Consumers are more conservative: looking to increase savings and – when they do spend – consumers are even more focused on getting a good deal.

New Discount channels are driving retail industry growth.
In 2002, the retail industry grew 5%. While most retail sectors experienced flat-to-minimal growth, discounters enjoyed sales increases of 16% in 2002. Bargain-seeking shoppers have clearly demonstrated a willingness to sacrifice convenience to achieve savings. This behavior is likely to continue even after the recession has eased.

Grocery cedes share of trips to discount channels.
In 2000, consumers shopped the grocery channel an average of 79 times. Discounters were shopped an average 54 times per consumer in 2000. By 2002, grocery trips had fallen by an average of 10 annually, to 69 trips and discounter trips climbed sharply to 65 trips. Share changes reflect this reversal of position: grocery share of trips – 45% in 2000 – fell to 42% in 2002. Discounters share climbed from 25% to 33% over the same period. Discounters are increasingly offering grocery solutions: grocers beware.

Cross-channel shopping is prevalent, but non-discounter share of expenditures is flat-to-falling.
The majority of consumers frequent various channels on their shopping expeditions. Grocery maintains nearly 100% penetration, mass merchandisers have 95% penetration, and the drug channel has 85% penetration. Other discount channels have penetrated more than 50% of the US household population, while convenience stores fall just short of 50% penetration. However, it’s the discount channels that are capturing an increased share of dollar expenditures. Grocery share of expenditures – for example –fell four points since 2000, to 50%. Simultaneously, supercenter share climbed five points to an all-time high of 14% of expenditures.

Wal-Mart supercenter growth is driven by shoppers crossing over from competing channels- especially grocery. (See Graph Below)
In 2002, Wal-Mart supercenters enjoyed a 19.3% growth in shopper expenditures. Some of this growth is attributable to a sheer increase in the number of Wal-Mart supercenters in operation. But the majority of the increase – nearly 60% – stems from the waves of consumers transferring expenditures to Wal-Mart supercenters from competing retail channels. Though all channels are losing shopping expenditures to Wal-Mart supercenters, grocery is suffering the most. Grocery accounts for half of Wal-Mart supercenter crossover dollar expenditures. Multi-channel shopping will likely continue to proliferate as consumers remain diligent about finding values.