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Retailers Must Adjust to Consumer Adjustments

Nielsen shows how to sell to those hurt by rising fuel prices

CHICAGO -- Todd Hale, senior vice president of consumer and shopper insights for Nielsen, said that consumers' adjustments to rising fuel prices and the crashing economy must be acknowledged and figured into business plans for convenience stores.

Gasoline prices ranged from $2.11 to $3.27 in 2007, boosting customers' weekly spend on fuel 4%, from 12% in 2006 to 16% in 2007. If gasoline hits $4 per gallon, Hale said, that figure could jump to 19%.

Nielsen data showed that with no apparent immediate relief from the gasoline price increases, consumers are compensating in a number of [image-nocss] ways; 75% have combined errand trips, while 41% are eating out less, part of a growing trend of people doing more at home. To Hale, that means c-stores have an opportunity to further compete with restaurants.

More consumers report to Nielsen that they are cutting back spending in general, with low- and middle-income households making up the bulk of that number. With that in mind, said Hale, it is vital that c-store companies study how their business model is set up in relation to household income.

"Do you need to think about more private label, do you need to think about more coupons for low-income households, do you need to think about changing your assortment depending on if you're surrounded by low- or middle-income households, or if you are surrounded by high-income households, how can you take advantage of the fact they've got more money to spend?" said Hale. "It'sreally income-driven, and you need focus. It's going to be more challenging than 2007, so what are you doing different in 2008?"

Hale said tough times do not have to mean a growth slowdown, citing the examples of expansion by grocery chains Aldi and Sav-a-lot. He also said that although better-for-you products are a growth segment, c-stores should be as careful about that movement as they need to be about catering to high-income consumers.

Nielsen numbers showed that c-store customers fit the low-income demographic 13% more than they do the high-income bracket, and that 30% of Americans still regard themselves as unconcerned with healthy consumption.He showed an indexing chartdepicting health attitudes with customers of different channels of retail. A c-store chain's index of the two groups that make up the 30% unconcerned with health indexed 126 and 172. The index's bottom line is 100.

Hale also cited a c-store operator's recent answer to the question, "How's fresh going?"

"If you want to sell bananas in a c-store, you better make banana bread," the operator said.

Nielsen numbers showed that c-store basket rings rose from $10 to $18 from 2001 to 2007. Hale said for c-stores to continue that increase, they have to make sure they are concentrating on value, variety (location and merchandise mix) and convenience. "Value pricing is more important than ever before," he said.

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