Here's the most frequent question I get when traveling around the industry: “Is the consumer's shift to value shopping a permanent trend?”
I typically answer, “Yes, consumers can't live through such a tough economic time without being permanently changed in many ways.”
I'm now seeing more proof that my answer is on target. The consumer's focus on value continues mostly unabated despite increased evidence of economic improvement.
The latest research backs this up. The 2010 “How America Shops MegaTrends” report by WSL Strategic Retail found that 70% of women respondents said “it is important to get the lowest price on most things I buy,” up 6% from 2008. The report also found that deep discount food retailers such as Aldi and Save-A-Lot recently drew some 15% of lower-income households.
Moreover, a new report from NCH Marketing Services cited a stepped-up use of couponing — 77% used CPG coupons regularly in the past year — as proof of a “permanent change in the mindset of today's deal-seeking shopper.”
These reports won't surprise dollar store executives. Their discount-oriented businesses, which surged during the recession, keep on growing even as the economy picks up. In illuminating comments recently, Richard Dreiling, chairman and chief executive officer of Dollar General Corp., said, “We continue to see signs of this new consumerism, where people are shifting channels, trading down and changing their habits, and you're seeing it in the growth of our private brands… And 97% of our new customers said if there is a change in the economic environment, they would continue to shop with us.”
Conventional food retailers, meanwhile, continue to find room for new value programs, despite the onslaught of such program launches over the past couple of years. For example, Spartan Stores just unveiled a new initiative for its Michigan retailers that concentrates on lower prices and a stepped-up communications program to relay savings to consumers. H.E. Butt Grocery Co. is gearing up to introduce a new discount supermarket called Joe V's Smart Shop next month that will showcase “outrageously low prices.”
It's still unclear exactly what value approach the biggest chains will take going forward, but if Wal-Mart makes good on a promise to widen its price gap with supermarkets, that will likely drive competitive responses from conventional grocers.
Let's clarify one thing. The question isn't whether consumers will continue the same recession level of value spending across the board indefinitely. Logic dictates that if economic improvement sustains, shoppers will relax spending in some aspects and may opt for some indulgences.
Rather, the question is whether value has been permanently implanted as a more important concept in consumer brains. I say it definitely has, and we need to closely track how far reaching the behavior impact is going to be.
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