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Consumers becoming more conscious of spending habits, report finds

BY Michael Johnsen

NEW YORK Shoppers are expected to be more deliberate and purposeful in their spending going forward, as conspicuous consumption will give way to more conscious or practical consumerism, concluded a new report released Tuesday from PricewaterhouseCoopers and Retail Forward, a Kantar Retail company.

While the report suggested consumers will not be as apt to “trade-down” as the economy recovers, consumers who’ve discovered savings through private label are not expected to return to brands.

“The recession has tempered the rampant and excessive consumption, giving way to more mindful choices as shoppers increasingly seek out online and mobile coupons, comparison shopping sites, and loyalty and rewards programs,” stated Lisa Feigen Dugal, PricewaterhouseCoopers U.S. retail and consumer practice leader. “As consumers become more invested with using these tools in their shopping experience, retailers will need to adapt their strategies to appeal to this new generation of consumers.”

According to the report — titled “The New Consumer Behavior Paradigm: Permanent or Fleeting?” — retailers need to make promotion and savings-related information more easily accessible across all shopper touch points, especially as the explosion of online resources and new mobile phone shopping apps has made it easier for consumers to find a specific item.

As shoppers’ “wants” are steadily reintroduced into the equation, trading-down behavior related to the choice of retailer, product, or brand will lose some traction in the recovery, the report suggested. However, private-label brands will remain a significant factor due to their increasingly higher quality and low cost since retailers don’t have to advertise or promote them to the same degree as national brands.

Research findings included in “The New Consumer Behavior Paradigm” indicated that as many as 20% of consumers will continue to forgo buying items that seem too expensive, resulting in a contraction for the luxury and gourmet foods markets. The emergence of a more thoughtful approach to spending on luxury and non-discretionary goods means shoppers will place a premium on goods that have qualities of timeliness, usefulness and versatility.

“Although we’re starting to see signs of shoppers getting tired of trading down, they remain cognizant of today’s economic realities and need to balance that with personal desires to reward themselves,” stated Mary Brett Whitfield, SVP at Kantar Retail. “Retailers and suppliers can take advantage of this ‘frugal fatigue’ and offer affordable do-it-yourself alternatives to pricier products.”

In the past two recessions, Baby Boomers quickly led the recovery. However, this group has been hit hard by the recession at a point in life when their financial commitments loom large and retirement is on the horizon. Marketers will need to look to the smaller Gen X generation and large Gen Y population to fuel growth in the initial stages of the post-recession recovery. Among Gen X, one segment that will have a meaningful positive impact on spending is “up-market affluents” given their life stage needs and above-average spending potential.

A higher proportion of Gen Y’s income is discretionary as a result of fewer debts and a less-urgent need to accumulate wealth in the immediate term relative to older shoppers. Furthermore, as this generation is accustomed to instant gratification and demands the latest gadgets, spending on technology staples-like MP3 players and smart phones-will remain a priority and create unique opportunities for tech-oriented retailers.

Feigen Dugal added, “Retailers and suppliers must realize that there will not be a wholesale return to previous shopping patterns and behaviors. To succeed during the recovery, they will need to recognize that some shopper segments will still be in a ‘recession’ shopping mode. They must make sure consumer wants are aligned with the marketplace and turn more ‘need to have’ desires into the ‘must have’ needs of Gen X and Gen Y shoppers.”

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Duane Reade’s Q4 driven by store renovations, sales growth

BY Antoinette Alexander

NEW YORK Duane Reade announced on Tuesday that fourth-quarter sales rose 5.3% due in part to store renovations and strong pharmacy same-store sales growth.

Net retail store sales, which exclude pharmacy resale activity, increased 5.3% to $451.3 million from $428.6 million in the fourth quarter 2008. Total net sales inclusive of pharmacy resale activity rose 0.1% to $465 million.

Total same-store sales increased 2.6% as pharmacy same-store sales rose 6%. Front-end same-store sales increased 3.5% driven, in part, by strong sales of food and beverage items and OTC products.

Net loss for the fourth quarter was $84.8 million, compared with a loss of $17.4 million in the year-ago period. The retailer attributed the increase to an additional $59.5 million in fair value charges for the preferred stock’s mandatory redemption features.

For the full year, total net sales were $1.84 billion, reflecting an increase of 3.6%. Net retail store sales increased 4% to $1.76 billion.

Total same-store sales for the year increased 1.5%, with a front-end same-store sales decrease of 0.8% and a pharmacy same-store sales increase of 4.6%.

For the full year, net loss was $124.3 million, compared with a loss of $72.8 million in 2008. The increase in net loss, according to the 257-store chain, is attributable to the fourth-quarter fair value charge related to the company’s preferred stock, partially offset by a $12.5 million gain on debt extinguishment and the improvement in full year operating loss.

As previously reported, Walgreens is looking to acquire Duane Reade from affiliates of Oak Hill Capital Partners in a cash deal valued at about $1.08 billion, which includes the assumption of debt.

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Kroger’s Southwest division launches ‘Low Prices Plus More’ campaign

BY Allison Cerra

HOUSTON One of the largest retail grocery chains in the United States is reaffirming its committment to customers by kicking off a new marketing campaign in its Southwest division.

Kroger, which operates 209 stores and 90 fuel centers in Texas and Louisiana, is kicking off a cost-saving program. On any given day, more than 10,000 yellow tags are lined along the shelves that indicate deeper cost savings for customers, Kroger said. Additionally, the program will be supported by new store signage, television, print and radio spots to promote its value-added services and broad range of national and store-brand items.

“Kroger continues to be a leader in meeting customers’ ever-changing household needs. We recognize that over the past few years, families have changed their lifestyles and purchase styles but still desire quality products at an affordable cost along with friendly customer service,” said Bill Breetz, president of the Kroger Southwest Division. “In 2009, we saved Texas shoppers over $32 million through our various money-saving features like our everyday senior discount, coupon and fuel rewards programs.”

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