Digital CPG Blog

Significant findings of the  How America Shops MegaTrends report, “Moving On 2012″ report, by WSL/Strategic Retail, an authority on shopper behavior and retail trends, include:

·   Youth market no longer retail’s golden ticket. The youth market, 18-34 year olds, has the highest percent of those who do not have enough money to cover their basic needs, with close to a quarter (24%) in financial turmoil. Compared with people over 35, who were able to launch their careers 10 years ago, when times were good, this group is a long way from recovery, compelling retailers targeting this group to seriously rethink their strategies.

·      Branded products under threat. Shoppers in general are placing a greater focus on price, with two thirds (67%) of women agreeing that trusted brand names are not worth paying more for. More than a quarter (26%) of women admit that while they used to buy brand names they could not afford, they are no longer giving in to this indulgence. This figure is up 7 percentage points from 2010.

·       Six-figure incomes struggle. It takes a significantly higher income to feel financially secure in this economy, with nearly 30 percent of Americans in the $100-150K income bracket claiming they can only afford the basics. Once considered affluent, six-figure income shoppers are now identifying themselves as middle-income.

“There is a huge fundamental issue when more than half of Americans can only afford basic necessities and people who earn up to $150,000 think they are poor,” said Wendy Liebmann, CEO of WSL Strategic Retail.

Candace Corlett, president of WSL Strategic Retail, continued, “The youth market, which has traditionally been known for its enthusiastic spending of discretionary income, has virtually dried up. As today’s young adults struggle to find employment and pay down student loan debt, this demographic now represents the largest percentage of Americans who are challenged to afford even basic necessities.”

Key Additional Findings

A stunning 75 percent of women now say it’s important get the lowest price on everything they buy, up 12 percentage points from 2008 and up 22 percentage points from 2004. Some old and new methods of ensuring they get the lowest price include:

• 68 percent regularly use coupons to reduce costs — up 7 percentage points. vs. 2010.
• 45 percent claim they only buy items that are on sale — also up 7 percentage points
• 43 percent make a point to search online for store discounts before they shop — up 10 percentage points
• 14 percent of women say they use their mobile phones while in store to see if they can find a lower price, before they buy.
• The “cautious pause” before buying to ask, “Is this a smart use of my money?” (Total: 66%, HHI $150K: 47%)
• Managing their aspirations by sticking to brands and stores they can afford (Total: 58%, HHI $150K: 36%)
• Staying out of stores where they might be tempted to overspend (Total: 48%, HHI $150K: 28%), and,
• Buying less when they go shopping (Total: 43%, HHI $150K: 26%)

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The Internets… they keep changing things. Like making shoppers more prepared when they reach the store, and less apt to be enticed to products they didn’t come in for:

It’s no secret that technology has changed in-store shopping behavior. Whether it be through mobile phones, barcode scanning, or price comparison shopping sites; consumers are more prepared than ever in the store aisle. According to a new study released from Deloitte, nine in 10 shoppers know what they’re buying before they arrive at a store, and more than eight in 10 (83 percent) have a set of brands in mind that they will consider.

Of course, when considering the holiday shopping season ahead of us, we know in-store shoppers are more mindful of finding online deals or coupons. According to the study, 80 percent of surveyed shoppers say they do their own research online and have a pre-determined price point and a potential savings amount in mind before they step into a store. Furthermore, two-thirds of consumers shop when they know products will be on sale.

Three-quarters (75 percent) of survey respondents assert that they are smarter shoppers than they were a year ago, and nearly nine in 10 (86 percent) believe they are getting more precise in what they buy.

CPG Manus are being a lot more direct lately… want to know why? Read on -

Brands have jumped on the e-commerce bandwagon, establishing their own direct-to-consumer domains, not just for the opportunity to sell directly to consumers, but also to engage and understand their shopping behaviours.

As you can see, the lines are quickly blurring between manufacturer and retailer. And there’s no doubt that this will foster accelerated innovation and cooperation.

What’s driving this market shift? I can think of a few initial reasons:

The economic crisis

Simply put, the rise in commodity prices and recent recession have forced us to innovate. The ability to combine advertising budgets to reach the right consumers preserves margins for both manufacturer and retailer.

Access to the consumer

For brands that don’t have their own retail website, this represents an opportunity to get closer to the consumer.

Proximity to the consumer allows a brand to capture more meaningful insights that can then be used for spotting market trends, or uncovering ways to accelerate a brand’s product development.

Lack of effective means to gather customer feedback

Brands that lack the capability to capture these insights may end up using blunt-force consumer surveys, which creates misinformation that results in products like the ‘Homer-Mobile‘.

The convergence of retailers and manufacturers foreshadows a flattening of the marketplace and increased challenges in differentiation.

A recent report found that Walmart shoppers aren’t always so loyal:

• The price king has been toppled. 86 percent of Walmart shoppers no longer believe that Walmart has the lowest prices. Every brick and mortar retailer lowered prices and shouted sales throughout the recession, while the Internet became the go-to place for shoppers in search of the lowest price. If Walmart no longer stands for everyday low price (EDLP), what does it stand for?
• Where did the Walmart shopper go? The Walmart Shopper is finding better shopping elsewhere, including dollar stores, supermarkets and other mass merchants. “The most frequent core shoppers are still in the [Walmart] store, but they have less money to spend and so are always looking for a better deal,” says Liebmann. “If Walmart can convince them that it has the best deal every day, they will hopefully not be so tempted to go elsewhere.”
• The recession is not over for Walmart shoppers. 82 percent of the retailer’s shoppers say they haven’t seen any improvement in their financial situation in the past year, and 70 percent don’t expect their finances to get better next year. The economic downturn, credit crunch and higher gas prices, among other factors, squeezed the discretionary spending out of the wallets of Walmart shoppers.

Has the recession caused a permanent shift in how consumers shop for deals? Are shoppers finally going online and staying there?

What are some of the retail trends unique to 2011?

Opening Keynote speaker Keith Anderson, Senior Analyst at the RetailNet Group predicts:

There’s a lot of 2011 left, but here’s a “pre- post-mortem” based on what I’ve seen so far and what I expect to see before year-end:

• Smartphones went mainstream (> 50% adoption by year-end), and tablets proved optimal for e-commerce
• Amazon was prioritized as a customer by suppliers, a competitor by retailers, and a target by regulators
• Multichannel retailers embraced online-offline integration and invested to make sites and stores support each other
• CPG retailers and brands realized that digital influence (marketing) is as important as e-commerce (retailing)
• Everyone realized that business model viability depends on context, and that the world looks very different for Peapod, Amazon Fresh, FreshDirect, Wag.com, and Petflow today than it did for Webvan, Pets.com and Kozmo a decade ago

There will be much more to talk about at the conference, but that’s a pretty good start.

Learn more from Anderson at the conference:

The Smarter Shopper: Marketing to the Digital Consumer
Tue – Wed, September 20-21, 2011
Stamford, CT
Register now >
Don’t forget – Use the code “digitalcpg” at registration for a 10% discount just for DigitalCPG.com readers!

Dive into these two great presentations on your lunch hour or your mid-afternoon slump:

The State Of Retailing Online 2011: Marketing, Social, and Mobile report conducted by Forrester Research Inc. is out and here are the key takeaways:

- 91 percent of retailers currently have a mobile strategy in place or in development (up from 74 percent a year ago).

- 72 percent of retailers say they will increase their spending on social networks this year over last year.

- Retailers report that 21 percent of all mobile traffic is coming from tablets.

- 48 percent of retailers report having a mobile-optimized Web site; 35 percent have deployed an iPhone app; and 15 percent offer an Android app and an iPad app.

- 62 percent of retailers said the returns on social marketing strategies are unclear, and nearly the same percentage said the primary ROI from social marketing is listening to and gaining a better understanding of customers.

This research begs the question: is your iPad app ready yet?

Groupon is entering the grocery market. But probably not how you think.

Groupon is partnering with a New England supermarket chain to offer deals on groceries. Here’s what will happen – Groupon subscribers will be notified of the deal at Big Y Foods stores — a $39.99 “Shellfish Grill Pack” for $24. But unlike most Groupons that rely on a printed coupon or mobile phone for redemption, those who purchase the deal will have it credited to their Big Y Foods loyalty cards.

“It’s seen as test of whether Chicago-based Groupon can adapt its daily deals to retailers beyond the small merchants that have been its core business,” reports Chicago Business. “One major challenge has been redeeming the Groupon offers. The traditional daily deals require Groupon users to print out paper coupons or use an electronic version on their mobile phones.”

Of course,  if it’s successful, other grocers are lined up to participate. Would your brand want in on such a deal?

“Betting that parents are less stingy when it comes to junior’s needs, two of the country’s biggest makers of diapers and wipes are pushing through price increases. Kimberly-Clark Corp. plans to raise prices on its Huggies diapers and wipes by 3% to 7% while Procter & Gamble Co. announced a 7% rise in prices for its Pampers diapers and 3% increase on wipes,” reports the Wall Street Journal.

Why such confidence? That’s because:

“Shoppers are less likely to switch to a cheaper brand on a baby product than many other items on the shopping list,” according to a recent survey by Sanford Bernstein analyst Ali Dibadj.

“Just 10% of consumers said they switched to a cheaper diaper brand because “it’s not worth paying more in this category,” and no consumers reported switching baby food. By comparison, nearly a third of consumers said they switched brands of bleach, bottled water and liquid soap.”

Who else can raise their prices?

“Brands that have the highest market share, are purchased infrequently (like sunscreen or lightbulbs), are necessities, have few competitors, or where it would be hard to reduce consumption (like toilet paper) have the most power to enforce price increases.”

“Mr. Dibadj ranks Kimberly-Clark and Clorox among the least able to raise prices, given that they operate in highly competitive categories with high commodity cost pressures. P&G and Colgate, with their exposure to distinctive items like beauty products, pet food and toothpaste, fare better, Mr. Dibadj said.”

Walmart is taking it’s shot at Peapod and FreshDirect.

The “Walmart To Go” test allows customers to visit Walmart.com to order groceries and consumables found in a Walmart store and have them delivered to their homes.

Products include fresh produce, meat and seafood, frozen, bakery, baby, over-the-counter pharmacy, household supplies and health and beauty items.

The online grocery business has proven difficult to succeed in given the perishability of fresh food and the industry’s small profit margins, analysts have said. But this model probably makes more sense with its stores and distribution centers across the country already. They have the infrastructure.

Should be interesting to see how it plays out.