American consumers shed light on festive season attitudes, food industry to get customary boost
American consumers aren’t feeling particularly jolly heading into the holiday shopping season this year with more than one-third (35 per cent) of American consumers across all income levels expecting to spend less, according to new research from The Nielsen Company. With an economy in turmoil, only six per cent expect to spend more and fifty per cent of consumers surveyed expect to spend the same amount as last year during the holiday shopping season.
Fortunately, the Australian economy in not experiencing the same difficulties as the American economy and, with recent stimulus to the economy, there is cause for festive optimism. There are some notable findings in the US that may be relevant here in Australia, nonetheless.
Nielsen’s survey of 21,000 U.S. households shows that economic concerns are at the forefront of consumers’ minds but many in the food industry will still receive the customary holiday boost. “Clearly, consumers across all income levels have some trepidation about holiday spending,” said Todd Hale, senior vice president of Consumer & Shopper Insights. “The unstable economic environment is creating a high level of caution among consumers, leading us to conclude that this will be a tough holiday season.”
Longing for Value
Of those consumers that report they’ll spend about the same, about half report they will spend the same amount this year in grocery stores, supercenters and mass merchandisers. Convenience and gas retailers may come out ahead this year with 12 per cent of consumers expecting to spend more in these locations, likely related to a rise in pre-paid gas cards as gifts this holiday season.
“Retailers answering consumers’ call for value will capture shoppers’ attention this holiday season,” Mr Hale suggested. “Whether it’s lower prices, instant rebates or free shipping offers, value messages will speak to bargain-seeking consumers in today’s tough economic climate.”
It is also important to remember that consumers understand there is more to value than just price.
Of those consumers surveyed who entertain at-home, almost one-third (29 per cent) plan to spend less this holiday season — including 26 per cent of high income consumers. For those entertaining away-from-home, 33 per cent expect to spend less, including 31 per cent of affluent consumers.
“The trend to entertain at-home continues as consumers grapple with high gas and food prices, and it bodes well for manufacturers and retailers promoting at-home options,” Hale noted. “At the same time, it points to a challenging holiday season for restaurants, hotels and banquet facilities catering to the holiday crowd.”
Holiday Forecast: Flat
Nielsen forecasts 4.7 per cent growth in dollar sales or $98 billion across grocery stores, drug stores, mass merchandisers and convenience stores, for the holiday shopping season. The growth forecast, slightly higher than last year’s 4.5 per cent gain, is in large part due to higher commodity prices. Nielsen projects unit sales, however, to be flat or down 0.8 per cent versus a year ago.
“We project unit sales to be flat to declining as consumers reduce spending and modify their shopping activities to focus on necessity versus discretionary items,” said James Russo, vice president of marketing, The Nielsen Company.
Advice for the Holiday Season
Nielsen reinforces consumers’ desire for value and offers these suggestions:
* With a high level of planned reductions in spending among shoppers, sound inventory management will be vital to avoid extra inventory come January.
* Reach out to your best customers in stores, through direct mail and/or via advertisements and make them feel special about your brands and your stores by providing customers with special coupons or sale prices.
* Recognise that necessities, not the nice-to-haves, will drive strong sales this holiday season. Toiletries, baby care products, food items and gift cards for groceries, gas, telephone and car maintenance are expected to succeed.
* This holiday season, retailers are likely to see a big upside in consumer packaged goods (CPG) sales. Leverage these CPG products to drive basic gifts and stocking stuffers, such as toiletries, pet care, household cleaners and special holiday packs for food and beverage items.