LAS VEGAS — Supermarkets must pay attention to the changes consumers are making in their grocery shopping habits during the current recession, because those changes are likely to become the new norms when the economy recovers, speakers here told a general session audience at the National Grocers Association annual convention last week.
“People will think differently and exhibit different behaviors after this economic cycle,” Michael D. Capellas, chairman and chief executive officer of First Data Corp., Greenwood, Colo., told attendees.
Despite some softness in grocery sales, Capellas pointed out that grocery retail has not fared as poorly as general retail in this downturn.
“People are not spending money on luxury foods, but they are still spending on basics,” he said.
What will get the U.S. out of the current economy, he noted, “will be consumers taking it upon themselves to personally de-lever. As deep and dark as things look today, if everyone would just live within his own means, the picture would improve.”
Capellas said the recession resulted when U.S. consumers overspent, which drove asset values down, which put pressure on financial institutions, which contracted the credit markets, which boosted unemployment.
“So this recession is a correction that's been building for years, as people at the grassroots overspent, overborrowed, undersaved and rode home equity prices till everything came to a crashing halt,” he said.
Rather than a U-shaped economic recovery, which would move from a low point back up gradually, Capellas said he expects a V-shaped recovery, with a quick move to the bottom and a quick move back up again.
Also speaking at the session was Don Coxe, global portfolio strategist for the food and consumer group of BMO Capital Markets, Chicago, who said stocks of retail and wholesale food companies remain good investments, ranking No. 7 on the list of best stocks, despite the stress consumers feel.
Because supermarket operators are close to consumers, he advised them to adapt their pricing and inventory levels “to tie in with items on which consumers have money to spend.”
Thom Blischok, president, consulting and innovation, IRI, Chicago, said the change he foresees may require some re-strategizing by supermarket operators.
He predicted that 2009 will be “a tough year, fraught with risk, but it will be the greatest time for American retailing to reinvent itself.”
Demonstrating the speed with which changes will occur, Blischok urged retailers “to seize the second, not the moment.”
The changes he said he anticipates include:
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Decisions on what to buy will occur before consumers enter the store, based on a shopping list and a budget, so impulse buying will be way down. Blischok cited statistics indicating that 76% of buying decisions this year are being made before consumers enter a store, compared with 60% at the beginning of 2008.
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Consumers will be looking, first and foremost, for good prices and quality goods. “The right prices — what might be called the ‘affordability equation’ — and the right values will determine shopper loyalty,” Blischok pointed out.
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Consumers will buy products with which they are familiar, rather than trying new products. Citing data indicating that 75% of consumers surveyed said they had tried five or fewer new products in 2008, Blischok said, “For many people, new-product testing will not be on their agenda this year either.”
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Consumers will be looking for more direct-marketing offers and doing more shopping from home.
