September 2004 Times & Trends Executive Summary:
VALUE-CRAZY SHOPPERS
Shopping in a Value-Driven World

Times&Trends reviews new developments and critical events across all major CPG categories, key channels and all consumer groups, providing powerful benchmarking insights to help guide strategic decisions.

This month’s subject is part of Times&Trends series on Channel Competition, specifically an update on shopping trends at Mid-Year 2004, focusing on cross-channel shopping and the shifting trips to value channels like Wal-Mart, Costco and Dollar General.

Here’s a summary from the brief:

Prices Rise, Income Growth Softens, Setting the Stage for Increased Value Shopping

■ Consumer spending has waned as personal income growth softens. As “fixed” household costs increase (debt, rent, etc.) income stagnation forces middle to lower-income households to spend less in discretionary areas.

■ Slowdown in job growth and uncertainties about prices are curbing consumers’ feelings about today and the future.

■ Food & beverage “staples” and gas prices are rising, pressuring budgets. Dramatic upward price jumps in the basics of life – gas, eggs & bacon, milk and meat & poultry – put pressure on shopping trips to conserve and spend less.

■ Grocery retailers are experiencing a no-growth sales situation. In Q1 and Q2 2004, non-food scanned supermarket sales growth is down in both dollars and units versus year ago. Food is relatively flat in dollars, but below the line in units. And beverages are more positive in dollars but also negative in unit volume. Net, overall CPG unit sales are very soft, indicative of reduced shopper spending.
 

Shift to Discount Channels Continues As Shopper Trips Weaken

■ Supercenters’ share of shopper spending at all retail outlets continues to climb. Wal-Mart’s total share is above 17%.

■ Shoppers’ overall trips to all retail outlets are down. Supercenters see the only major bump. Shoppers’ trips to grocery outlets still out-number trips to supercenters 3:1, but are down the most.

■ Even the heaviest “value” channel shoppers visit more supermarkets. This presents an opportunity but also vulnerability in a value-driven environment. In the most developed supercenter region, the south, supermarket trip decline was second highest of the four regions.

■ Grocery and value channels share their most important “trip-traffic” categories. However, total shopper penetration of the most purchased categories is much higher at grocery than at value channels – underscoring grocery’s vulnerability in a challenging economic environment.
 

IMPLICATIONS:  The current evidence is that softened consumption and personal incomes and rising gas, food and beverage prices are fostering weaker CPG sales, particularly in the grocery channel. But, shopping trips are down – particularly at grocery – and shoppers visited on average slightly fewer channels in the past year.  Is the novelty of outlet-shopping to reap the best values wearing off?  Or are shoppers consolidating trips, able to find extensive values at all outlets?

At the mid-point of 2004, shopper shifting to more value-focused discount channels has not saturated, particularly as Wal-Mart expands its supercenters, Costco its club stores, and dollar and drugstore chains their locations, CPG shelf space and food & beverage item discounting.

It’s critical that CPG companies and retailers work together in merchandising and shelf presentation in both environments to provide shoppers with the value information they need to make sensible budget-stretching choices.  And the key to efficient and effective strategies will be their ability to translate insights into consumer behavior and trip-traffic categories into superior execution.    

The challenge will be to identify “trip-traffic” categories, creating competitive values and communicating these values effectively to each store’s shopper base, particularly consumers with the heaviest number of cross-channel visits.

A complete perspective also means understanding the sales and value dynamics of Wal-Mart, CPG’s largest retailer, on a category and brand level basis, including their private label businesses.

Source: IRI's Times & Trends Reports
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