Shoppers rethinking how and where they shop for food

Posted by Daniel Palmer on 20th February 2009

Shopper traffic and shopping frequency is down across most food and mass channels in America despite an increase in monthly shoppers at Wal-mart – the country’s largest retailer. Tighter household budgets-due to a variety of factors including food price inflation, concerns about job security and declining home values-are altering the shopping behaviour of consumers, TNS Retail Forward ShopperScape research indicates.”Shoppers are rethinking how and where they shop for food and are limiting spending to non-discretionary purchases of groceries and other household essentials,” Kelly Tackett, Senior Consultant at TNS Retail Forward and author of the recently published Retail Forward Intelligence System report, Shopper Update: Food Drug Mass Shopping Frequency, commented. “Others are trading down to value-oriented formats such as dollar stores, extreme-value grocers and Wal-mart Supercenter.”

As the perception of value becomes increasingly important and the number of value-conscious shoppers seeking out retailers where they can realise the most cost- and time-savings across their whole shopping list grows, the low-price leader Walmart reaps the greatest benefits. The retailer’s supercenter format and one-stop shopping appeal allows shoppers to consolidate shopping trips, thereby saving time and petrol.

TNS research illustrates how other food, drug mass channels are faring as shoppers shift behaviour:

* Convenience stores: More than a third of US shoppers now buy most of their fuel at alternative outlets, such as supermarkets, supercenters or warehouse clubs. “With gasoline prices expected to creep higher once again, shoppers will continue to pursue the best deals, including fuel discount promotions tied to shopper loyalty programs,” Tackett explained. The decline in the monthly fuel purchaser base as well as the pullback on discretionary and impulse purchases by most shoppers do not bode well for c-stores, TNS warned.

* Small-format value stores: Despite a monthly shopper base of low-income consumers who are most susceptible to the economic downturn, dollar stores and other small-format value retailers will benefit as shoppers across income brackets turn to the channel for food and other household essentials.

* Warehouse Clubs: Although the leading club players, such as imminent Australian arrival Costco, maintained their affluent monthly shopper bases in 2008, further expected cutbacks in discretionary spending, particularly on big-ticket items, is not expected to help the channel going forward.

The recession in America has had a major impact on food retail, according to official statistics, with spending falling a dramatic 3.7% in the fourth quarter – after adjusting for inflation. Food retail, as a rule, is considered to be shielded from a downturn as it is not discretionary spend, but it appears that in America consumers have not only been deserting fine dining establishments, trading down and foregoing that extra coffee at the local café but also de-stocking their pantries. Food retail in Australia continues to perform relatively well, however, despite pressure on some cafés and fine dining restaurants. The latest ABS data found trend growth for food retail increase to 1.8%, while cafés, restaurants and take-away outlets saw a fourth straight decline in trend growth (-0.6%).