In this week’s Nielsen Online Webinar, “Consumers in Control: Social Media Strategies for Retailers and Brands,” I will be highlighting two key social media opportunities for Retailers: listening and engaging.

No one can deny just how prevalent social media has become, from Facebook to Twitter, its meteoric growth is hard to ignore*. But why is it absolutely imperative that retailers pay attention and get involved? The answer is simple, and dates back to pre-Internet days: the purchase consideration process has always been a social endeavor. Before the advent of social media, a shopper may have consulted a couple friends and family members before making a purchase. Today, shoppers’ networks have gone from being composed of just a handful of people to hundreds, if not thousands of people, and many of them probably strangers. Social media has not only transformed the research and purchase consideration phase, but it also provides shoppers with a platform to advocate for the products and stores they love. Advocacy has always existed, but social media has made this stage even more critical, amplifying the size of the audience reached.

By tapping into these conversations, Retailers can gain insight into what’s happening online, as well as what’s happening offline. What are shoppers saying about your customer service and return policy? What do they think about the selection of products you offer (both in-house brands as well as big name brands)? At a corporate level, how do shoppers feel about your sustainability policies or community relations?

To bring the concept of listening to life for the Retail industry, we analyzed online discussion about the private label lines of three club stores: Costco, Sam’s Club and BJ’s. Although, on average, private label discussion tends to account for less than 5 percent of club store buzz (more commonly discussed topics include price, membership fees and name brand products), we felt that the topic warranted closer inspection, given the tenuous economy. When we honed in on private label buzz for the three selected club stores, we found that price and comparisons to big name brands were the key topics driving discussion. We also found that Baby Care was the most frequently referenced product category.

While BJ’s yielded the largest share of discussion about price and Baby Care items, it also generated the lowest levels of quality discussion (see Figure 1, callouts A-B). This is not to say that shoppers felt negatively toward BJ’s quality, it just wasn’t the driving factor for choosing BJ’s brand diapers and baby care products. By contrast, buzz about Costco’s private label line, Kirkland, focused almost equally on price and quality (see Figure 1, callouts A-B) and less on comparisons to brand name products than BJ’s (see Figure 1, callout C). So, what does this mean? It points to the possibility that shoppers may not just choose Kirkland products because they are cheaper versions of their brand name counterparts, instead, Kirkland may be on its way to becoming a brand with an independent identity as opposed to just another store brand.

Source: Nielsen BuzzMetrics
Note: n =100 messages for each retailer, timeframe = Q1 2009; topics accounting for less than 3% of discussion have been removed for ease of viewing

This is just one example of the types of insights we can glean from listening to social media. Sign up here and join me for the July 15 Webinar to hear more about the barriers to entry and opportunities identified through this private label case study and how you, as a Retailer, can tap into social media to better understand and meet your customers’ needs.

*Visitation to Twitter.com is up 1,448 percent YOY (May 08 vs. May 09); number of visitors to Facebook has increased 190 percent YOY (May 08 vs. May 09)

Overall in November, trips to retailers declined by 2.9% from the previous year.

Retail Channel Trends
Toy stores, electronics stores, and department stores saw the most dramatic declines in the number of shopping trips last month vs. a year ago.  Trips to toy stores dropped by 23%, trips to electronics stores were down by 21%, and trips to department stores fell by 17%, Nielsen reported.

Retail channels offering low prices and strong value fared the best during November.  Trips to dollar stores (+6%), online retailers (+4%), supercenters (+2%), and club stores (+1%) showed the only year-over-year increases in trip growth rates.

Private Label Trends
In October, value-minded consumers increasingly shifted their purchases to private label products, as the U.S. economy weakened.  Unit sales of private label brands grew by 5% in October — up from 2% growth throughout the past year.

Meanwhile, unit sales of branded products showed a mirror opposite trend, with growth declining by 4% in October after showing an overall 2% decline during the 52-week period ending November 1.  As the U.S. economy slipped further in the third quarter and continued to slide in the fourth quarter, unit sales of branded products worsened in every grocery department — except frozen foods.

In terms of dollar sales, private label products maintained steady 10% growth in October – a trend that has remained constant throughout the past year.  Private label alcoholic beverages, fresh and packaged meats, fresh produce, frozen foods, and dry grocery products saw the fastest dollar sales growth in October.

In contrast, overall sales growth for branded products slipped to 2% — down from 3% during the 52-week period ending November 1.  Although still growing, sales of branded dairy, deli, and fresh produce experienced the greatest declines in dollar sales growth.  Sales of general merchandise products dropped markedly in October and during the 13-week period ending November 1.

Given the continued weakening of economic conditions, Nielsen expects this behavior to intensify in December and into 2009.

Nielsen’s Tips For Manufacturers, Marketers, and Retailers
-Exploit new growth areas: consumer appetite for at-home products, basic necessities, and good values will only intensify.

-Don’t assume consumers are not willing to pay a premium: price is important, but delivering a clear value proposition is more critical.

-Protect your turf: manufacturers should work proactively with their retail partners on branded vs. private label shelf-set rationalization.

-Companies that maintain sales and marketing efforts during recessions typically enjoy better post-recession growth: now is the time to utilize advertising to build customer loyalty and differentiate your brand.

Stay tuned on Nielsen Wire for regular updates on U.S. retail trends and other key economic indicators.

Declines were especially steep during the last four weeks of the quarter, which saw the collapse of Lehman Brothers, the near-collapse of Merrill Lynch, and the government bailout of AIG.

Traditional mass retailers (excluding supercenters), department stores, and office supply stores saw the most dramatic declines in the number of shopping trips last quarter vs. a year ago.  Trips to mass retailers dropped by 9.1%, trips to department stores were down by 8.9%, and trips to office supply stores fell by 7.9%, Nielsen reported.

Retail channels offering low prices, strong value, and mostly “need to have” products — versus “nice to have” items — fared the best during Q3 2008.  Trips to online retailers (+7.5%), supercenters (+3.6%), and dollar stores (+3%), for instance, showed the largest increases, compared with Q3 2007.

More affluent consumers looking for bargains drove the growth in trips to value retail channels, while lower-income households adopted more drastic cost-cutting measures, eliminating shopping trips entirely, according to Nielsen.

U.S. consumers surveyed by Nielsen in late September and early October also reported having significantly less discretionary income than their global peers. 

Almost 25% of U.S. consumers reported having no spare cash after covering their essential living expenses.  In comparison, just over 10% of consumers worldwide reported a similar lack of expendable income.

U.S. consumers were also more likely than consumers worldwide to use expendable income to pay off debts, Nielsen found.  More than 35% of U.S. consumers reported using their spare cash for debt payments, while only 30% of consumers worldwide reported the same.

In early October, Nielsen’s holiday retail forecast estimated that 85% of U.S. consumers plan to spend the same or less on holiday shopping, versus 2007.

Stay tuned on Nielsen Wire for regular updates on U.S. retail trends, and other key economic indicators.

A recent Nielsen survey of 21,000 U.S. households found that 35% plan to spend less this year than they did in 2007.  Just 6% will spend more this year, while 50% say they’ll maintain the same level of spending from 2007.

Lower-income households reported large reductions in their holiday spending — but so did high income households.  In all, 37% of lower-income households are expected to cut back on holiday spending, as will 34% of higher income households.

What’s Hot?

Necessities — rather than novelties and luxuries — are expected to drive holiday sales this year, according to Nielsen’s research.

Toiletries, baby care products, food items, and gift cards for groceries, gasoline, telephone, and car maintenance are expected to see strong sales.

Practical, cold-weather apparel — socks, fleece jackets, and undergarments — and household goods, like cook books, bed/bath linens, and kitchen supplies are also expected to sell well in November and December. 

Among more affluent consumers, fireplace accessories, kitchen ware, family games, and other at-home entertainments will dominate sales. 

As in past years, DVDs, video games, mobile phones, books, and wines and spirits are also expected to generate a fair share of holiday sales. 

Although many consumers are curtailing their spending on out-of-home food, alcohol, and entertainment, sales of movie tickets, which remain an affordable luxury, are expected to stay strong in November and December.

What’s Not?Department stores and retailers of electronics, toys, home improvement supplies, and office supplies are likely to feel the brunt of the economic slowdown as consumers shift their purchases to more value-oriented retailers.   

Where’s the Action?Online retailers, dollar stores, grocery stores, supercenters, mass merchandisers, and club stores are expected to attract the lion’s share of holiday spending, as consumers seek to minimize the number of shopping trips they make — and find good values.

View in depth Nielsen data on consumer holiday spending projections.

Read Nielsen’s holiday sales forecast.

Go behind the numbers: read NielsenWire’s Q&A with James Russo, co-author of Nielsen’s holiday retail forecast.

Read coverage of Nielsen’s findings in Adweek, Media Post, Promo, and the Rocky Mountain News.

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.

Nielsen’s holiday retail forecast predicts a 4.7% gain in dollar sales over 2007.  Unit sales, however, are expected to be virtually flat (-0.8%) versus a year ago.

The forecast includes projected sales at food stores, drug stores, mass merchandisers, and convenience stores, across 125 product categories tracked by Nielsen.

With the economy in turmoil, the 2008 holiday season will be closely watched for indications of declining consumer spending.  Declines in consumer spending were last recorded in the fourth quarter of 1991, during the recession of the early 1990s.

Go behind the numbers: read NielsenWire’s Q&A with James Russo, co-author of Nielsen’s holiday retail forecast.

View in depth data on holiday retail sales projections and consumer spending expectations.

View the full press release.

Read coverage of Nielsen’s findings in Convenience Store News and Adweek.

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.

NielsenWire recently spoke with the co-author of Nielsen’s holiday retail forecast, James Russo, Vice President of Food Sector Marketing, Nielsen.

NielsenWire: What is the forecast for 2008 holiday shopping season*?

James Russo:
All consumer, economic, and trade indications point to a flat-to-declining holiday selling season across the core consumer packaged goods (CPG) categories that Nielsen tracks. While we forecast, in dollar sales, a gain of 4.7% vs. a year ago, we also predict a decline of -0.8% in unit sales. This is directly tied to the current volatile economic environment, during which close to 33% of households across all income levels are projected to spend less this holiday season, according to a Nielsen Consumer Household survey conducted during the third quarter of 2008.  But despite this tough economic climate and slowing sales, there are opportunities for growth. Segmentation of consumers, channels, and categories will be critical to uncovering those opportunities.

NielsenWire: What might take marketers and retailers by surprise this season?

James Russo:
In the past nine months, consumers have found ways to cope with the current economic situation, as indicated by the following trends:

-”Trading Down,” whether from higher-end retailers and brands to value-retailers and brands, or from vacations to “staycations,” is the new norm.

-Consumer decisions are failing into either “necessary” or “discretionary” spending.

-At-home entertainment is resurgent.

-Consumers are seeking and responding to value solutions, as evidenced by the reemergence of coupon activity as an effective promotional tool.

Surprisingly, consumers are continuing to purchase Health and Wellness items, as evidenced by double-digit gains across products with antioxidant, organic, or whole grain claims.  Note, however, that consumers are increasingly purchasing these products from value oriented grocery stores, supercenters, and club stores.

Look also for a strong year from online sites (especially on Cyber Monday), superstores, and club and dollar stores.  Consumers are increasingly shopping at these retailers as they stock up and pursue value.

And although it is shrinking, there is still a consumer market for “affordable luxuries” and premium based consumption.  In this climate, “trading up” behavior will be less extensive, however consumers, especially during the holiday season, may opt to buy nicer bottles of wine, serve premium candy, or even purchase that new mobile phone. The challenge is to understand consumers’ motivations and shopping patterns at an increasingly local level. 

NielsenWire: What trends should consumers be on the look-out for this season?

James Russo:
CPG manufactures and retailers recognize the strategies that resonate with consumers – but, execution will be the challenge. We anticipate heavy promotional activity to drive traffic in a slowing economy, however, look for organizations to also tap into the increasing consumer desire for “at home” experiences.  This, more traditional holiday message will be delivered through advertising and marketing messages where retailers and manufacturers will push their value solution for consumers. It’s an opportunity for manufacturers and retailers to engage with shoppers, communicate their understanding of current financial pressures, and deliver their value propositions — all while securing brand and/or retailer loyalty. With over 2.5 billion customers ready to shop this season, according to Nielsen In-Store, manufacturers and retailers need to prepare for the challenges that accompany increasingly savvy consumers.

NielsenWire: How did you assemble this year’s forecast – what data did you look at and how did you analyze it to arrive at your final conclusions/predictions?

James Russo:
The Nielsen Consumer Industry forecast is different from any other industry forecast, as it is perhaps the most comprehensive. Our Business Consulting Group conducted an extensive analysis of 125 core CPG categories, in order to understand their current and historical trends during previous holiday seasons.  Then, they analyzed existing trends, along with current and expected economic conditions, to arrive at a macro-level result that delivers foresights to support our clients’ holiday and 2009 planning efforts.

NielsenWire: How accurate is this year’s holiday sales forecast?

James Russo:
It’s too early to gauge our forecast, but we are firm in our commitment to the findings and will be delivering mid-holiday period updates of our forecast, as well as insights in what consumers really think about holiday advertising.  Nielsen IAG, which measures consumer engagement with television programs, national commercials, and product placements, will also deliver an exclusive real-time summary of the most effective holiday commercials, with a focus on CPG categories and retailers.  Stay tuned on NielsenWire for these forecast updates.

NielsenWire: Looking beyond the key holiday selling season, what insights can you share that will assist marketers as they plan for 2009?

James Russo:
Millions of consumers are set to enter stores and shop online this season – they do so while grappling with historic levels of household financial pressures. The tactics and strategies CPG companies develop now, to weather the holiday retail season, will not only provide benefits in the short term, but also during the long term, as consumer behavior in the U.S. undergoes fundamental changes. It is our recommendation to utilize the economic slowdown as a time to build competitive advantage and secure your position going forward.  A few key points to keep in mind:

-Value is clearly the main motivator for consumer purchase decisions — whether it’s channel selection, product choice, functionality, or price. 

-Necessary vs. Discretionary spending will drive consumer decision-making.  Food, personal care and household basics – not nice-to-haves – will drive strong sales.

-Expect widespread “Trading Down”: consumers will move from higher-end retailers and brands to value-retailers and brands; from fresh segments to canned & frozen varieties.

-As manufacturers and retailers look to control shipping costs, a local sourcing trend will continue.

-Look for increased levels of at home consumption — whether in food or entertainment.  Products and Services that deliver on this messaging will succeed.

-New Usage patterns are emerging: skipping meals, washing clothes less often, watering down cleaning solutions, skipping medications or taking half doses.

These are unprecedented economic times, with unique challenges and opportunities.  Now, perhaps more than ever, the ability to understand your consumers and specifically what is driving their behavior will ensure success during the coming holiday season and beyond. The steps you take now will not only assure success in the short term but, more importantly, position your organization for long term growth.

Read Nielsen’s holiday retail sales forecast.

*Nielsen’s Holiday Sales Forecast includes sales during the eight weeks in November and December in food stores, drug stores, mass merchandisers, and convenience stores. 

Submit questions about the report to Nielsen forecast co-authors, James Russo and Todd Hale, by commenting below.