The contrasting fortunes of retail channels

Posted by Daniel Palmer on 5th February 2009

Shopping and buying less, American consumers are increasingly relying on supercentres, according to The Nielsen Company. Nielsen’s analysis of 2008 unit sales found budget-conscious consumers increased their supercentre spending across nearly every department, including dairy, dry grocery and prescription drugs.

According to Nielsen’s research, the ‘supercentre’ channel – which includes the likes of the world’s largest retailer, Wal-Mart – was the only retail channel to post overall unit sales growth at one per cent. While four retail channels (drug stores, supercentres, club stores and dollar stores) recorded sales gains from consumers shifting department purchases across channels, these gains were offset by consumers cutting back on purchases for an overall decline in unit sales.

“Mass merchandisers and grocery stores are feeling the impact of the supercentre,” said Todd Hale, senior vice president, Consumer & Shopper Insights, The Nielsen Company. “Where we really start to see the expanding reach of the supercentre is in grocery, where a shift is occurring in everything from dairy and produce to meat and frozen foods. While the grocery channel has traditionally been viewed as recession-resistant, it is not recession-proof.”

Grocery Gains
The grocery channel was not without bright spots. Tens of thousands of conveniently-located grocery stores helped some grocers grab general merchandise sales from mass merchandisers, dollar stores and other channels. Promotions tying in-store spending to discounted petrol prices helped the channel capture sales from convenience and gas retailers. “Grocery stores have found gas promotion tie-ins to be very successful in capturing shopper trips, especially when high gas prices were putting a serious crimp on consumer spending for the first eight months of the year,” Mr Hale advised. A marketing idea Australia’s two largest supermarket chains are well aware of.

2009 Expectations
Not surprisingly, most major industries are struggling with lower consumer spending and will continue to do so as unemployment increases in 2009, but grocery retail will be better shielded than most.

“All retail channels are being impacted by consumers cutting back on purchases to cope with tough economic conditions,” Mr Hale noted. “The good news for traditional retailers is that this means consumers will be spending more time at home, serving up opportunities for at-home consumption of food and non-food products.”