Consumer Mindshift

Aug 17, 2009 12:00 PM

The recession has redefined the supermarket shopper


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The economic environment has created a new shopper — one who's cooking at home more often, aggressively looking for bargains and often forgoing the indulgence of impulse purchases.

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The impact of her actions can be seen in the Related Articles, where SN examines product-sales data from Information Resources Inc., Chicago, for the last 12 months. The Related Articles include a list of 50 key categories selected for analysis, and the following premium content: dollar and unit sales for 297 categories, and in-depth examination of the 50 key categories in three SN departments: Nonfood (Convenience Loses), Fresh Market (Value Added) and Center Store (Buying on a Budget).

The data also describe a market where shelf prices of processed foods have resisted the downward pressure of input costs, even as many prices for many fresh items have receded since spiking a year ago.

“Consumers have been forced to make significant changes to everyday behaviors,” IRI said in its August Times & Trends report, which analyzes shopper behavior across different market channels. “Today's consumers are more self-reliant and more in-tune with how and where money is spent. Recent reports indicate that the recession is easing, but consumers remain firmly entrenched in savings mode.”

To appeal to the shoppers of today, CPG companies are offering retailers extended, deep promotions rather than cutting list prices, and many traditional supermarkets have responded to consumers' quest for grocery savings with sharper pricing on everyday items and enhanced private-label offerings.

The tactics appear to be stemming channel erosion to some degree, according to the Times & Trends report, although supercenters are still gaining share. While shoppers increased their spending at supercenters when the economy went into freefall late last year, the aggressive pricing stance of traditional supermarkets may be sinking in as consumers find bargains in their local stores.

For the 52-week period that ended June 28, IRI reports that supercenters and dollar stores both increased their penetration in terms of number of households that shop at those formats, compared with the preceding year. Supercenters have gained 1.8 points, to 65.9% penetration among households, while dollar stores have gained 1.4 points, to achieve 53.8% penetration among households.

Among those shoppers who are considered heavy supermarket users, supercenters picked up 2.4 percentage points, while dollar stores captured 0.6 points from this group.

In recent earnings reports, some of the larger publicly traded supermarket operators have noted that promotional activity is at an all-time high in the market.

Craig Herkert, chief executive officer of Minneapolis-based Supervalu, said last month that customer spending on promotions in its first fiscal quarter, which ended in June, was up 400 basis points — a 4% swing — compared with the level of a year ago.

“The magnitude of this unprecedented shift in consumer purchasing mix lowered both transaction size and margins, and is primarily driven by changing consumer shopping behavior,” he said. “Current conditions have made being thrifty ‘cool’ once again, and we are seeing this in our customers' cautious purchasing behavior. For many, what was an essential just a few quarters ago is now more likely a discretionary purchase, and tradedown continues at a higher year-over-year rate than originally expected. If the item is not on sale in our stores, it's far more likely to remain on the shelf.”



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