Viewpoints

Fall Preview: Five Key Consumer Gauges to Watch

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Predicting the future is a highly risky activity. That becomes clear when you look back at our primarily upbeat financial analyst roundtable from a year ago, entitled “Looking Up.” Here are some quotes from analysts in that forum. “I think this whole inflation thing will have blown over in three months time and things will be back to normal again.” “Consumers are actually going to hang in there a little bit better than people think.” “The consumer is feeling good about supermarkets.”

Those comments appear ill-timed in light of today's hindsight, but in fairness to those analysts, not all were bullish, and the nation's quick economic slide caught many other financial observers by surprise as well. This year, as you'd expect, our roundtable analysts were far more pessimistic. You can see for yourself by reading the coverage that begins on Page 14.

Predicting the course of the next few quarters is virtually impossible, but there are some important measures to track. In this column I will draw attention to five key consumer and economic signposts to watch in the coming months, based partly on this week's roundtable story.

Pace of Trading Down: Supermarkets were hurt when consumers began switching to discounters and lower-priced merchandise. The pace of trading down needs to be watched. If the pattern continues, supermarkets will increase market share losses and the winners will include supercenters, dollar stores, limited assortment stores and warehouse clubs. But price-oriented supermarkets could benefit if higher-income consumers trade down from upscale emporiums.

Price Resistance: Supermarkets and packaged goods companies have been able to pass along much of the product cost increases, but there's always concern consumers will balk. Some observers are optimistic about near-term inflation. A big test of consumer price resistance will be the likely surge in meat and poultry prices beginning in the near future, resulting from reduced supply. This needs to be monitored well into next year.

Regional Blues: Food Lion, known for its low prices and low-income Southeast markets, was hurt when its consumers took an economic hit. That development shows that even low-price leaders aren't immune from hard times. Keep an eye on Food Lion and other Southeast chains to see how this progresses.

Macro Markers: A daily array of government and private-sector reports aim to take the temperature of this economy. The smart observers will keep their eyes on a handful of key macro measures, including employment, housing and inflation (especially involving food and energy costs). Those gauges will be critical in determining where consumers are headed, especially if there are big swings in any direction.

Permanence of Behavior Shifts: No one can predict if consumers will return to old spending habits once the downturn is over. But that will be a major long-term question. Will supermarkets permanently take share from restaurants? Will discounters keep gains taken from supermarkets? The longer and more painful the slump, the less likely that consumers will bounce back to old ways.

Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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In their Viewpoints columns, SN editors give their perspectives on current industry issues.

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