Although retailers have been thinking about the 2009 holiday season since last January, consumers are just starting to think about their holiday plans. As we do every year, Nielsen fielded its annual holiday retail survey at the beginning of this month to get an understanding of consumers’ holiday shopping plans.  While the economy appears to be improving at a snail’s pace, it’s apparent that many consumers intend to spend less and save more this holiday season. In fact, some 42 percent of respondents stated that compared to a year ago they were planning on spending less money on holiday gifts, compared with only 4 percent who intend to spend more.

An even more surprising trend is that of the money that consumers plan to spend this holiday season, a smaller percentage will be spent online: 63 percent of survey respondents said that they would do at least some holiday shopping online, down 10 points from two years ago. Meanwhile, 7 percent of respondents said they would not do any shopping online compared to just 1 percent in 2007.

Consumers Expect to Spend Less Money Online this Year

Among those that do plan to shop online this holiday season, many consumers expect to spend significantly less than last year. In 2008, 42 percent answered that they would spend more than $300 online during the holiday season. This year, that percentage has dropped to just 31 percent, while 22 percent of respondents said that they are going to spend less than $100 online.

So why do some consumers shop online? Interestingly, the main reason is not to save money, but for convenience. Respondents said the top reason they would shop online was the ability to shop whenever they wanted, followed closely by the ability to avoid the large crowds associated with holiday shopping.

While consumers appear to no longer view the Internet as a value channel, they still see it as a place to do comparison shopping, find coupons and do research. And it’s not just consumers coming from lower household incomes–shoppers of all ages and income levels rely on the Internet to inform their in-store purchases. In October 2009, over one-third of the U.S. online population visited at least one deal-oriented Web site.

Although many consumers don’t feel that they save money by making purchases online, they do view the Internet as a deal-seeking venue. When asked how they use the Internet before going shopping in physical stores, 55 percent of respondents said they use the Internet to compare prices across retailers and 49 percent answered that they use the Web to learn about sales and promotions available in physical stores.

It is clear that while the majority of all purchases continue to take place offline, the Internet has an important role to play—deals found online impact holiday purchase decisions and drive purchases at brick and mortar locations.

For more information and insights on the 2009 holiday season, download our recent webinar,2009 Holiday Retail Season: What Consumers Have in Store for Retailers this Season.

Overall, Canadians were more confident than their neighbors to the south, with more positive outlooks regarding job prospects, the state of their personal finances and their willingness to spend.  With respect to jobs, 46 percent of Canadians say that local prospects will be “good” or “excellent” over the next 12 months, compared to just 28 percent in the U.S.  More than half (55%) feel that the state of their personal finances will be “good” or “excellent,” up three points since July and compared to 51 percent of Americans who said the same.  More than two-fifths of Canadians feel it is a good time to buy the things they want and need, compared to 33 percent of Americans. All of that said, a strong majority (82%) of Canadians feel that the country is still in a recession, despite the fact that the Bank of Canada announced that the recession was over.  Nine in ten Americans said that they felt their country was still in a recession.

In a sign that the consumer’s obsession with all things economic and recession is starting to recede, Canadians are once again showing concern with other issues such as work-life balance and health.  But despite these positive signs, Canadians remain cautious about spending.  Paying off debt is the top use for spare cash (with 39% saying that is their priority) followed by socking away money into savings (26%).  When they are spending, holidays and vacations is the top category (26%) with out-of-home entertainment (23%) and home improvements (20%) rounding out the top three.  Canadian men indicated that they are more likely to spend on outside entertainment and new technology, while responsible Canadian women are focused on paying off debt.

Read the full report.

As we previously noted, consumers have re-embraced coupons as a way to get more for their money.  In the third quarter, year-to-date coupon redemption was up 26 percent to 2.4 billion redemptions, making it the fourth consecutive quarter of growth, according to new research from Inmar in collaboration with The Nielsen Company.  During 2006-2008, coupon redemption stagnated at 2.6 billion each full year.  Inmar, which provides logistic management solutions to retailers, wholesalers and manufacturers in the consumer goods and healthcare markets, is forecasting that 3.2 billion coupons will be redeemed this year, marking a significant increase over recent years.

But while food coupons have typically driven activity, non-food coupons for general merchandise, household items and personal care drove growth in the third quarter, up 45 percent over the same period last year (food items were up 26 percent over the same period last year).  While supermarkets remain the traditional coupon redemption channel, representing 64 percent of redemptions, the dollar/discount/variety and mass merchandiser channels are up at a faster rate.

“It’s clear that coupons have increasingly become an important way for consumers to save some money when shopping.  Digital coupons are driving a huge increase in redemptions but still represent a small percentage of distributed and redeemed coupons.  Meanwhile, freestanding inserts account for almost 90 percent of distributed coupons, but just over half of redeemed coupons,” said Todd Hale, Senior Vice President, Consumer and Shopping Insights at Nielsen.  “Moreover, coupon enthusiasts buy more products per trip and generally have a higher spend per trip in the grocery and supercenter channels.  The fact is, coupons can yield a significant return on investment, and savvy consumer goods manufacturers should seriously consider how they may be able to play a role in driving sales.”

“It was resoundingly clear from the presentations that we have a new consumer on our hands, one that has emerged from the financial crisis with what could be a permanent shift in their values, spending habits and lifestyle choices and affecting the way they consumer and purchase alcohol.  They are more frugal and demanding value.  Investing in new product development should be an essential part of any suppliers’ strategy in counteracting consumers’ heavy reliance on price discounts as a key purchase driver,” said Michael Walton, Executive Director, Nielsen Liquor Group in the Pacific.

Nielsen’s regional experts also provided a snapshot of trends in their respective markets.  The four key topics that were common across regions were:

• Low carb and low sugar: new products and brand extensions in this category are performing relatively well.
• Marketing to the over 50s demographic: This group makes up between 40-50 percent of alcohol consumers in the UK, US, Australia and New Zealand, yet are often overlooked when it comes to marketing in favor of a millennial focus.
• Online consumers: New ways and approaches to marketing to the technologically savvy consumer.
• New product development: A critical pathway to improve returns and drive real category growth.

Gavin Humphreys noted that just 57 percent of British beer drinkers popped over to the pub in 2009, compared to 70.5 percent in 1998.  In fact, the off-trade sector looks set to overtake share of beer consumption over the next two years.  While beer remains the favorite, wine is rapidly gaining share, driven by its link with in-home entertaining and also the availability of cheaper South African, Italian and Chilean varietals.

In the U.S., Danny Brager noted that more than 50 percent of Americans choose to entertain and eat at home more often.  Consumers are often trading down in an effort to find the best value, favoring domestic offerings and sticking with brands they know and trust.

Paul Kirby said that almost half of Australian drinkers claimed to be going out less often compared to last year, but are actually trading up when they do go out, sparking growth in premium and super premium alcohol segments (imported beer, international wine and bottled wine priced over $20).  Almost half of all packaged liquor was sold on promotion and 77 percent of alcohol consumers selecting their choice of outlet because it offered great promotions.

Just to the southeast, 60 percent of New Zealanders claimed to be going out less often compared to last year, according to David Hanson.  Annual sales for the off-premise market grew by 10 percent in value terms and 7 percent in volume.  More than three-quarters (77%) of all beer sales were sold on promotion.

But just one year later, gas prices have fallen considerably.  In June and July of 2009, the average price per gallon for regular gas was between $2.50 to $2.62.  According to the seventh update to Nielsen’s gas price impact survey, lower gas prices have loosened up consumers’ behavior, although not to pre-2008 levels.  For example, 71 percent of respondents said that they were still combining errands and trips in an effort to save gas – down from a year ago, but still above the 68 percent who said the same in 2007.  Another 44 percent said that they were doing more things at home, down from 51 percent in 2008 but still higher than the 39 percent in 2007.  One area that consumers have not yet rushed back to is eating out: 52 percent said that they were eating out less, the same as 2008, and well above the 38 percent who said the same in 2007.  Meanwhile, carpooling has dropped, with just 5 percent of respondents indicating that they were sharing rides, a decline of two points from 2008.

While some behavior seems to be returning to pre-2008 patterns, it’s clear that consumers are still adjusting behavior, due in part to gas prices.  One-quarter of U.S. households are buying gas at locations because of incentives tied to spending levels at a grocery store where they shop.  They continue to buy less expensive grocery brands, and shop at supercenters.  As we highlighted previously, the use of coupons is high, with 38 percent of respondents indicating that they are using more coupons.

“Compared to last year, the price of gas was low this summer, making it one less thing consumers had to worry about as they grappled with issues such as job security, retirement, putting kids through college and making mortgage payments.  That said, with economic recovery beginning to take hold, it will be interesting to see if consumer behavior shifts considerably as they feel more confident about their circumstances,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at The Nielsen Company.

Nielsen started conducting the Gas Impact Survey in July 2005.  This year’s survey had more than 63,000 respondents.

“Trading over the summer has been volatile, but the underlying trend is a slowing of top line value growths.  Food retailers continue to rely on promotions and price cuts to draw in shoppers, a strategy that seems to be working for most chains as penetration has increased,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

Waitrose and Morrisons recorded the strongest growth in value sales during the twelve week period (11.4% and 8.1% respectively), while the launch of Tesco’s Clubcard in August has helped increase spend per visit by 5 percent as shoppers seek to maximize spending within the store.

In item posted here in March, I made the following statement:

U.S. consumers would certainly benefit from lower prices.  But retailers should be careful with how far they push their manufacturer partners to lower prices. If they simply push for lower prices without planning for the right lower prices, they may find it extremely difficult to grow same-store sales this year.

That article reviewed category retail unit price trends for the 4-week period ending 1/24/2009, which were up 5.5 percent across the store, but we were starting to see some sizeable price reductions in a number of commodity-price-driven categories.  Of the 123 studied categories, we found 11 with price declines of up to 12.4 percent versus the prior year.

But what a difference six months makes.  Since the end of January, unit prices have fallen rapidly.  For the 4-week period ending 7/11/2009, unit prices were up just 1 percent and the number of categories with price declines almost tripled to 30 categories.  Categories with the largest price compression include fresh eggs (- 24%), milk (- 19%), cheese (- 10%), diet aids (- 9%), baby needs (- 8%), fresh produce (- 7%) and shortening & oil (-6%).  None of these seven categories posted dollar sales growth and four of the seven saw dollar sales fall between 16 and 20 percent.

Consumer Packaged Goods Prices Have Dropped Sharply

July 2009 Unit Prices Up Just 1.0% Across the Store

Five of Seven Categories with the Greatest Price Increase Posted Dollar Sales Growth

My colleague Mark Laceky, Vice President of our Price & Promotion Practice, cautions retailers on price rollbacks, stating that price rollbacks reduce category sales as categories have far less price sensitivities than brands.  As price rollbacks are market-wide, there is no competitive advantage for individual retailers, so no inherent traffic gains are made.

These price cuts are providing consumers with exceptional value, but they are showing up in the form of weakening or declining department, category and same-store store sales trends for many U.S. retailers.  Just check out the latest monthly or quarterly same-store-sales trends for the leading food, drug, mass-merchandiser and warehouse/club retailers.  Retailer announced price reductions have been very common as of late, so don’t expect for the situation to improve in the near term.

“The primary reason for conducting Nielsen UMAR was to obtain first of all a realistic estimate of this segment, and secondly to profile their media and consumption habits,” said Partha Rakshit, Managing Director, South Asia at The Nielsen Company.

Nielsen’s survey of more than 18,250 affluent individuals across 35 Indian metro areas, initiated a new method of defining affluence. The study was based on a household’s lifestyle and ownership of consumer durables as opposed to monthly income or education.  Variables used included the employment of domestic help such as a maid or driver, holiday trips abroad, dining out habits, ownership of home computers, cars, air conditioners and type of home Internet connections.

Based on this study, Nielsen estimates a total of 2.5 million affluent households in India, of which 2.2 million belong to the “upper middle” segment; 200,000 in the “upper upper middle” segment and about 100,000 in the “rich” segment.  Delhi ranked as the most affluent city in the country, followed by Bangalore and Greater Mumbai.

Sixty percent of affluent households are nuclear families, and nearly a quarter have elders living at home.  Ninety percent own their homes, 75 percent have automatic washing machines and nearly 40 percent have a home theater and modular kitchen.

The affluents are energetic consumers of media.  At home, they will speak in regional Indian languages, but they prefer their newspapers to be in English (nearly 75%).  They like to watch TV in Hindi.  Sixty percent go to movies outside of the home, and more than half use the Internet at home.  Surprisingly, they are not that keen on reading magazines: more than 60 percent said they did not read magazines.

“Our survey delves deep into the media consumption habits of the affluent class of Indian society and provides a wealth of consumption pattern information to aid marketers in preparing their strategy and media plan,” said Rakshit.

Overall, the study found that the economic slowdown has not had a major impact on the spending habits of affluent individuals. However luxury accessories along with travel/vacations were areas where spending was curtailed significantly in comparison. [see graphic]

As a whole, Canadians are more likely to wait out minor illnesses and conditions before doing anything about them.  Almost two-thirds said that they wait to see if a problem gets better before taking OTC medications.  Ten percent of those surveyed said they never take non-prescription medications for minor ailments, preferring to tough things out, and some indicating that they believed that using these products could be harmful to their health. 

When illness does strike, 17 percent of Canadians take advantage of their medical coverage and visit their doctor for advice (compared with just 9 percent for Americans).  They also put a lot of stock in their pharmacist: 40 percent said that the advice from pharmacists was important to them when choosing an OTC medication, compared to just 13 percent in the U.S.

“Canadians can be classified as minimalists when it comes to self-medication, especially in tough economic times.  When we do reach for an OTC treatment, we normally rely on the advice of a pharmacist to find a medication that is effective, fast, safe and offers value for money,” said Carman Allison, Director, Marketing Communications at Nielsen Canada.

Read the full report.

Earlier this year, Tropicana – the leading juice brand in the U.S. – undertook a rebranding of its ubiquitous packaging.  Gone was the graphic of an orange with a straw in it, a clear symbol that the juice inside the carton was fresh, and in was a more abstract graphic of a glass of OJ.  No doubt, Tropicana took all of the traditional steps for testing the new packaging and rolled it out across the nation.  But consumers who saw the new packaging in stores reacted strongly: they didn’t like it.  And they weren’t shy about contacting the company or posting comments about it on the Internet.

Tropicana quickly relented and reverted to the previous packaging.  A senior executive said, “What we didn’t get was the passion this very loyal, small group of consumers have.  That didn’t come out in the research.”  Tropicana listened to what its customers were saying and shifted course.

This is but one example of how companies are increasingly learning more about their customers by tuning into unprompted consumer expression, or “listening.”  In an age where delivering what your customers want is more important than ever, companies in a range of industries are pairing listening with more traditional forms of research that are based on asking.

Read more about the importance of listening and how it can be used effectively in the latest edition of Consumer Insight.