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.”

On a dollar volume basis, grocery stores continue to capture the highest percentage of consumer dollars, with 33.1 percent.  In Grand Rapids, Michigan, groceries capture almost 50 percent of the consumer spend, while in New Orleans grocery stores account for just over 20 percent.

Dollar Volume By Channel

Warehouse club stores are a major force in Western states, with the greatest percentage of consumer spend in San Francisco and Seattle.  In fact, of the top 10 markets for warehouse club store sales, nine are located in the west.  Meanwhile, warehouse clubs have the lowest percentage of share in Louisville and Columbus.  Across the U.S., drug stores capture about 3.8 percent of consumer spending, but in Cleveland, they make up almost 9 percent, while in Denver, they make up less than 2 percent.

Club stores skew to high-income households, while dollar stores, supercenters and drug stores attract a greater percentage of sales from lower income households.  Household has kids are more likely to spend their money at mass merchandisers, super centers and club stores.

The top three categories skewing to high income households are wine, diet aids and floral/gardening, while large households are buying disposable diapers, baby food and frozen juices and drinks. Seniors skew toward vitamins, medications/remedies and canned fruit, and households with teens skew towards sanitary protection, ethnic health and beauty products and gum.

In the last year, most channel penetration trends remained stable.  Supercenters saw the greatest increase, 2.4 percent on a year-to-year basis, while mass merchandisers saw the greatest decline, with a 2.9 percent loss. More interesting is a look at how channel trends have changed over the last 12 years:

Percent of U.S. Households Shopping: 2008 vs. 1997

“As consumers change their spending habits, both retailers and manufacturers are finding growth and profit opportunities by adapting their merchandising strategies to the changing retail landscape,” said Tom Pirovano, Director, Industry Insights at Nielsen.

Other subjects examined in Nielsen’s report were:

• Other channels (e.g., apparel stores, home improvement, electronics) and their average spend per trip
• Categories with the broadest appeal across demographics
• Categories with the highest buying rates and purchase frequencies
• Categories with the highest percentages sold with manufacturer coupons
• Food and beverage sales outside the traditional grocery channel

Across 114 categories representing more than 99 percent of all department sales Nielsen monitors, six categories had price increases of greater than 15 percent over a year ago.  38 categories had price increases of 0 percent to 4.9 percent, while 11 had price declines. The top five categories with the largest price increases over the course of the year:

• Dry vegetables & grains 25%
• Flour 23%
• Jams, jellies & spreads (including peanut butter) 19%
• Car accessories 19%
• Pet food 16%

Higher commodity prices played a role in all of the food categories, while higher crude oil prices drove increases for motor oil in the car accessory categories.  Meanwhile, the following categories decreased in price:

• Fresh eggs -12%
• Milk -8%
• Candles & Incense -5%
• Light bulbs and telephone accessories -3%
• Non-carbonated soft drinks -3%

In the four week period ended January 24, 2009, unit prices across the store were up 5.5 percent – exactly the same as the 2008 Consumer Price Index calculated by the U.S. government.

“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,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

Read the entire article about pricing trends in the lastest edition of Facts, Figures & the Future here.

“Mass merchandisers and grocery stores are feeling the impact of the supercenter,” said Todd Hale, senior vice president, Consumer & Shopper Insights for Nielsen.  “While the grocery channel has traditionally been viewed as recession-resistant, it is not recession-proof.”

That said, grocery stores saw some gains, helped by tens of thousands of convenient locations, prescription drug shifting from drug stores and gas promotion tie-ins from convenience and gas retailers.

To read the whole press release about retail channel trends, click here.

Of the more than 122,000 items introduced, 3,882 (3.2%) achieved more than $1 million in sales, while 198 items (0.2%) achieved more than $10 million in sales.  Only 15 items (0.01%) generated more than $50 million in sales.  The new items generated more than $21 billion in sales in 2008, representing 5.7 percent of all CPG sales reported by Nielsen for the year.

Those categories that saw the most new product launches were cosmetics, candy, paper products and bread and baked goods.  The snack category, which saw 3,619 new products, generated the highest sales – more than $21 billion – and accounted for 18.2 percent of all snack sales for the year.

“Most of the top new items are extensions of existing brands.  Of the top 100 new items, 98 were extensions, with only 2 entirely new brands,” said Tom Pirovano, Director of Industry Insight at Nielsen.

Even though the number of new items introduced in 2008 remained about the same from 2007 (122,743 versus 122,530), they generated 6.6% more sales.

“The consumer shift to private label items requires that brands innovate and add new features to win back shoppers.  It is difficult to predict the year ahead, but we expect new products to have more health and wellness claims, additional package size adjustments and more premium private label products,” said Pirovano.

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.