“While many retailers will likely scale back expansion plans in 2009 and 2010, aggressive and forward-looking retailers will use this time to test new formats and look for opportunities to expand in existing and new markets as weaker retailers close their doors or put themselves up for sale.  Americans will continue to look to stretch their dollars further given the current economic uncertainty, creating larger markets for discount retailers and grocers alike.  At the same time, we expect to see continued contraction among electronics, toy retailers and other discretionary retailers,” said Todd Hale, Senior Vice President of Consumer & Shopper Insights at Nielsen.

Since 2001, value and convenience stores increased store count by the largest percentages.  But that trend is not likely to continue.  Since the end of 2007, the number of convenience stores declined by more than 1,400.  Additionally, the number of toy stores has declined by 60% over the eight year period (from 2,458 to 999).  Electronics stores dropped by 5%, and with the recent announcement from Circuit City that it will liquidate all of their 567 stores, that retail format will likely continue to decline.

On a more positive note, several retail channels showed solid growth:

• Warehouse Clubs
• Supercenters
• Dollar stores

Additionally, pet stores, book stores, office supply, hardware/home improvement and liquor stores all posted growth as well.

Walmart and Target led expansion over grocers, which expanded more slowly and in different ways, such as opening new, smaller formats.

The niche grocery segment has shown tremendous growth, with expansion from high-end (Whole Foods and Trader Joe’s) and low-end (Aldi and Save-A-Lot).  Aldi, the deep-discount German grocery chain is looking to add 75 stores in the US in 2009, and its sales grew 21% to $7 billion in 2008.  Aldi and Save-A-Lot, which has also expanded during the eight-year period in question, offer budget-conscious consumers extreme value across a reduced assortment set with strong emphasis on store brands.

In the drug store segment, Nielsen finds rapid new store openings as well as acquisitions from three big chains.  Walgreens opened or acquired 2,952 stores between 2001 and 2008, while CVS expanded by 2,158 stores and Rite Aid expanded by an additional 1,316 locations.  CVS will get another boost in store count when they close the deal to acquire Longs Drugstores.  Warehouse stores also continued to be popular, with BJ’s, Costco and Sam’s all showing significant growth.

Perhaps the most interesting finding of Nielsen’s research is the tremendous growth within the Dollar channel.  While Walmart corporate opened up 1,025 stores between 2001 and 2008, the five leading dollar store chains opened 8,291 locations during the same period.  Companies like Dollar General, Family Dollar and Dollar Tree opened thousands of stores each.  And in the process, some of the companies, notably Dollar General and Family Dollar, have evolved to offering more mainline brands than in the past to position themselves as a destination trip among their core shoppers.

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.