What a Shopper Wants
Analysts predict retail winners will focus on consumers, not competition
When Speedway’s Glenn Plumby presented this year’s industry numbers, he joked that the channel had clearly entered “The Twilight Zone.” According to Todd Hale, senior vice president of consumer and shopper insights for The Nielsen Co., Schaumburg, Ill., we are not alone.
“You guys aren’t the only industry in ‘The Twilight Zone’ right now,” Hale said as he began his “Understanding the Convenience Shopper ‘Superconsumer’ ” general session. “Retailing in general is having some tough times.”
Sci-fi spookiness aside, it’s been a tough road for retailers of consumer packaged goods (CPG). While the unemployment rate is improving and the housing and automobile markets seem to have rebounded, robust growth continues to elude the c-store channel and also competitors in the grocery, drug and value channels.
“Growth is tough today,” said Hale. “We’ve seen some great examples of innovation in your industry and other retail industries that for whatever reason is not leading to the kind of growth we’d expect.”
Nielsen’s 2009-2013 data on the convenience, grocery, drug, club stores and dollar/value channels paints a confusing picture. Dollar sales grew slightly, with 4% growth in 2011 and 3% growth in 2012 as the standouts—though Hale said that was largely due to inflationary pressure. Unit sales, however, have essentially stayed flat.
“It’s not a simple story,” said Hale of the lack of CPG growth. “There’s a lot of positive and negative stuff going on that’s impacting the ability of consumers to spend these days.”
Some positives for consumers’ wallets included increases to the minimum wage and Social Security benefits (though last year’s 1.5% increase probably won’t lead to much growth). On the negative side, Hale expressed concerns over a shrinking population and wages that continue to drop.
“We had the slowest population growth last year since 1937,” he said. “Is it any wonder that our total stores are only growing by 1%? I don’t think so.”
Nielsen’s data did have some positive numbers in certain categories: fresh meat and fresh produce, thanks in part to a consumer demand for perceived healthier or fresh products. Alcohol beverages are also doing well, with Hale describing the United States as “drinking like there’s no tomorrow.” However, these upswings were few and far between, with the positive figures unable to offset the negatives.
“If you look at unit volume, where there’s growth, there’s less growth,” said Hale. “Where there’s declines, there’s bigger declines. Clearly, consumers are having to make decisions as they don’t keep pace with inflation and as their wages aren’t growing over time. They’re making decisions to either shift spending to some other channel or cutting out spending altogether.”
Unfortunately, these are issues are not going away. Hale predicted that, as 2013 was, 2014 will be a tough year: “The financial headwinds we face are no different. Stagnant and slowing population are going to continue to limit spending power this year and probably many more to come.”
Winning the Consumer
That means the competition between channels is likely to increase. But Hale warned retailers against focusing too much on their competition: In this economic “Twilight Zone,” the focus needs to be on the consumer—the right consumer.
“You’ll notice the dollar store, convenience store and the automotive channels are the three channels where we see a stronger skew towards low-income shoppers,” said Hale. “I would argue that part of the issues you’re having in your industry is you have shoppers who can’t afford to spend these days. Their spending power is at risk.”
It’s no news that c-stores also tend to skew heavily toward male shoppers. But Hale sees this as an opportunity.
“We need new shoppers to drive growth in this industry,” he said. “The reality is, women still control the spending and trips in every channel but yours. Think about how to connect more with female shoppers.”
And though many c-store retailers have been successful in rebranding themselves to be more appealing to both women and younger shoppers, Hale warned against putting too much stock in the oft-talked-about millennial demographic.
“I’ve got two millennial kids,” said Hale. “They’ve left the nest—not to be confused with leaving the wallet. Young people don’t have a lot of money.”