CONSUMER ABILITY
Now that we've arrived at the mid-year point of the middle year of the last decade of the 20th century, it might be a good time to think about what the next five years will bring as they usher us into the next century; particularly, what changes will the future mandate in terms of consumer trends and format development?An important direction toward an answer to that question might be found in the
June 19, 1995
David Merrefield
Now that we've arrived at the mid-year point of the middle year of the last decade of the 20th century, it might be a good time to think about what the next five years will bring as they usher us into the next century; particularly, what changes will the future mandate in terms of consumer trends and format development?
An important direction toward an answer to that question might be found in the extensive results of a consumer-spending expectation survey published last month in SN.
The survey of 1,000 shoppers asked basic questions about what shoppers expect to spend on grocery items in upcoming months, and where they expect to do the spending. Results were generally encouraging to the supermarket trade because 25.8% of survey respondents predicted they would spend more in the future on grocery items from supermarkets and 51.4% predicted they would spend the same. In short, 77.2% predicted they would spend the same amount or more on products from supermarkets.
Expectations also were that spending for grocery items offered by the three most competitive alternative channels of trade would decline. The alternate channels are drug stores, membership clubs and discount stores. In each case, the more-plus-same number registered at 48.5%, 61.3% and 64.3%, respectively. These numbers don't suggest alternate formats are fading away, but none of the spending-expectation numbers approach the 77.2% registered for supermarket-spending expectations.
That's all good news, but there is a huge trend brewing in our society that may prove to be just as important as consumer expectations regarding future spending through various retail channels, and that is consumer ability.
Here's how: Countless studies have pointed out in stark terms that the gap in this nation between people who are relatively well-to-do and those who aren't is growing. I'll borrow some numbers pulled together from various sources by Management Horizons, a consulting division of Price Waterhouse. In brief, these numbers show that in 1980, 45% of the population made less than $25,000 per year, a percentage expected to be the same in the year 2000. During that same time spread, the percentage making $25,000 to $50,000 is expected to have dropped from 35% to 29% while the percentage of those making more than $50,000 is expected to jump from 20% to 26%. Don't forget to consider the eroding effect inflation has on wages, particularly those at the low end of the scale.
This means that notwithstanding consumer expectations, consumer ability to spend may be in decline and, certainly, the need for a sharper dichotomy in shopping choices may soon arise.
That need may be filled like this: A highly efficient limited-assortment format offering necessities and commodity staples may soon find a greater welcome. The offer in such a store should be premised almost entirely on price, although not to the extent of excessive reliance on packer or other off-labels. Branded goods should be used to make the price spread more vivid. Box stores that do some of this already exist, of course. One such company, Aldi, has a worldwide sales volume of nearly $21 billion with perhaps 10% of that volume deriving from the United States. And others are doing something similar. For instance, Supervalu's Save-A-Lot stores are also rolling out at a good rate and offering a little more upmarket shopping experience than does Aldi.
Meanwhile, the more affluent segment of the population may fill its needs for necessities and commodity staples in two ways: Those with some time to spend on the task may return to the membership club or similar bulk-driven format to do their own forward buying. Those with less time, perhaps the great majority, may turn to home delivery services that would restock pantry staples on the basis of a system that generates an order periodically based on consumer pantry withdrawals.
That means the conventional supermarket will be pressed toward a different offer concerning products and service: Supermarkets may find it necessary to make a fundamental shift away from staple and commodity items, and toward new products, especially prepared meals. Service may be defined as the ability to offer consumers new and unusual products, food-preparation ideas and training about how to prepare and present unusual meal components.
So, if consumer ability -- not consumer intention -- becomes a driving force in years to come, these may be among the chief store directions of the future.
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