CHICAGO -- Retailers must proceed with more caution than usual as they deal with a growing number of uncertainties on a day-to-day basis, Michael Sansolo, senior vice president of Food Marketing Institute, told an industry audience during the Speaks presentation at last week's annual FMI convention here.
"2001 was a lot of years in one year," he said. "Early in the year we talked about the recession, food-safety issues like foot-and-mouth and mad cow disease, and the rising costs of energy. After Sept. 11 our focus turned to terrorism and the threat of anthrax, and we were still concerned about the economy. The economy certainly took a hit after Sept. 11, but consumers reasserted themselves by going on an unbelievable spending binge.
"And now in May, we're spending more time concerned about the Middle East, and we're seeing both good and bad signs in the economy that are unrelated to terrorism -- all against the background of a country at war.
"All this is not just normal but a 'new normal,' and we must cope with it. Hindsight provides perspective, but we need to remind ourselves that we can only have the perspective of the moment we're in."
That perspective includes several conflicting ideas, Sansolo said. "We're told we were in a recession even before Sept. 11, but the economy rebounded in the fourth quarter, from a drop of 1.3% in gross domestic product in the third quarter to an increase of 1.7%, and GDP exploded in the first quarter, rising 5.8%.
"At the same time we're seeing unemployment at 6%, which is a seven-year high, yet we're hearing that people are re-entering the workforce and employment figures are running behind the expansion that's coming. So consumers are being careful, and the challenge for our industry is to deal with that uncertainty on a day-to-day basis -- to determine how it impacts shopping patterns and habits, and to respond accordingly."
Sharing the stage with Sansolo for a brief presentation, Louis Scudere, vice president, research and store development, for K-VA-T Food Stores, Abingdon, Va., said the economic uncertainties "provide an opportunity for the supermarket industry to reintroduce ourselves into more households."
One area of potential opportunity is home-meal replacement, he said -- "if we can figure out how to make it work this time. Consumers want meals they can prepare in 30 minutes or less, and they want meals that taste good, are available at a good price, and that are easy to fix and nutritious."
One barrier to making HMR work is the way retailers approach merchandising, Scudere said. "Consumers think in terms of what's for breakfast, lunch and dinner, while we offer meat, produce and dairy. We're offering commodity groups whereas they are looking for meal solutions, so there's a real opportunity for the industry to do innovative merchandising to win back share of stomach."
He also believes the Internet can be a successful adjunct to in-store merchandising. "Conceptually, it's a wonderful idea, but there's still a problem with infrastructure, and until broadband becomes more widespread, it will be hard to get consumers to participate," Scudere said.
"What the industry has to figure out is how to create value for consumers, because until we can leverage the consumer's time or add value, there's no reason for them to use it."
In the Speaks presentation, Sansolo cited a series of results from FMI surveys of consumer attitudes, including the discovery that price has reasserted itself as a major factor in how consumers determine where to shop, with 84% of respondents listing price as a major factor, compared with only 77% a year ago. Yet, with 94% employment, customers continue to seek out convenience and service, he noted.
"Shoppers are looking at supermarket ads again, and they tell us they like frequent shopper programs because they don't have time to make lists or to cherry-pick -- and they're also trying to stock up on bargains more often," Sansolo pointed out.
"But even though customer counts and store traffic are up, the rings at the front end are down because customers are trading down.
"We spent the 1990s adding value for customers, but now they're looking for ways to save money. So overall spending is down -- from $91 per customer per store visit in 2000 to $87 last year -- at the same time spending per customer at their primary stores is up to $77, compared with $71 in 2000."
According to Sansolo, surveys indicate consumers fall into three distinct segments: carefree spenders, economizers and time-challenged.
Each of these segments represent roughly a third of shoppers with 39% characterized as carefree spenders, 33% economizers and 28% of shoppers time-challenged.
