Retail Channel Shifts

The recession is forcing consumers to change where they shop; who's winning?

NEW YORK -- The recession has significantly changed the shopper mix in virtually all retail channels, according to a new report from WSL Strategic Retail. Supermarkets have regained the No. 1 share of shoppers for the first time in 10 years, ahead of supercenters. Dollar stores are in the right place at the right time with the right brands.

Meanwhile, convenience stores and drug stores are increasing share of shoppers because they're quick, easy, less tempting and save gas, according to the report. Mass merchandisers, including Wal-Mart and the Internet are picking up more [image-nocss] affluent shoppers. And, with unemployment reaching 10%, more men are doing more of the family shopping.

Smart retailers will heed the warnings of the retail-channel shift and adapt their businesses to realize the new opportunities, the report states.

The channel shifting in the recession has had some obvious moves: Wal-Mart has been a winner; Target has not. Supermarkets and dollar stores are doing well; mall stores are not. However, beyond the obvious, WSL said many of the shopper shifts open some immediate opportunities for retailers.

Beyond that, the WSL "How America Shops PULSE" report, which compares the demographic shift in shoppers by retail channel from the second quarter 2009 vs. the same period 2008, offered these other observations: If your retail strategy has been very Wal-Mart-focused, it might be time to take another look at the supermarket channel.
The obvious reason for the growth of supermarkets is the spending cuts shoppers have made in take-out food and eating out, which means more cooking at home with food purchased at the supermarket.
46% of shoppers stay out of stores where they are tempted to overspend. When you only need to buy food, the mass merchandiser has too much temptation.
Dollar stores are in the right place at the right timewith more of the right brands. Over the last five years, dollar stores have moved well beyond their rural Southern roots to open stores in middle class neighborhoods around the country. More manufacturers are realizing the dollar-channel opportunity and selling them more national brands.
Convenience stores and drug stores are increasing share of shoppers, which may seem contrary to the frugal shopper mindset, but it makes sense. When shoppers don't stock up, they run out, the report states.
C-store growth may seem like a contradiction in an era of price-conscious shoppers, but remember how shoppers are cutting back on groceries and not stocking up on sale items. That leads to running out. C-store prices may be higher, but if it's nearby and you save on gas and time, then the trade may be worth it.
Drug stores are seeing their strongest lift among middle-aged, middle-income shoppers, who, as with c-stores, may need the drug store when they run out of something, or find it a better choice, where a trip to a mass merchandiser to save a few cents turns into overspending on so much more than what was on the list. (It's that temptation again.)
Internet Shopping is up among the affluent, who are certain they find the best price online. From our last "Online Shopping PULSE" report in April 2008, we know that half of affluent shoppers feel they save money shopping online, and saving money is what they are looking to do more of now.
Mass merchandisers have an increase in affluent shoppers. For the first time, the share of affluent shoppers in mass merchandisers equals that of lower- and middle-income groups.
Warehouse Clubs have had a significant decline in younger shoppers who may have discovered that their smaller households were wasting much of what they thought they were saving by buying big club sizes.
The mall has lost across the boardmen, women, young and oldbut with the biggest losses among middle-income families who just don't need all that temptation. A final note about male shoppers: Unemployment has taken a larger share of adult men (10%) than adult women (7.6%) out of the workforce, so it is not surprising that stay-at-home men are taking on more of the family shopping errands.

WSL Strategic Retail is a New York-based market-research company.