“The post Christmas hangover was longer and deeper this year with snow and ice disrupting shopping patterns, resulting in fewer shopping trips being made.  Where shoppers did carry on shopping however, some spending was bought forward into the week ending 9^th January as consumers stockpiled.   As a result, sales in the following 2 weeks were more subdued.  Many seasonal lines also came off promotion and this would have impacted sales.  Retailers will need to encourage shoppers to keep spending over the next few weeks to lift momentum,” said Mike Watkins, senior manager retailer services at Nielsen.

“The ‘big freeze’ has highlighted some unusual shopping trends: in the 3 weeks ending January 16, sales of salt increased 128 percent overall and 185 percent in convenience stores.  Cat litter was widely recommended as an alternative to grit and sales of this jumped 31 percent during the snowy weeks.  Meanwhile, sales of basics like tea (+10%), coffee (+8%) and soup (+16%) also grew as shoppers stocked up and battened down the hatches.  Convenience stores also benefited from shoppers and commuters staying at home and treating themselves to breakfast.  Sales of eggs were up 33 percent, bacon up 24 percent, sausages up 33 percent and hot cereals up 39 percent.  And rather heartwarmingly, we looked after our wildlife – sales of bird food shot up 73 percent,” said Watkins.

12-Weeks to January 23, 2010 Share of Grocery Market Spend by Retailer and Value Sales % Change

Five percent of survey respondents felt that their job prospects over the next twelve months as would be “excellent” with the same number saying the same about the state of their personal finances.  That said, half of those surveyed believed that Britain will still be in recession by the end of 2010 and 70 percent said that they are adjusting their spending to save money.

Personal debt is the single biggest concern amongst Britons, with 14 percent identifying that issue, with another 12 percent identifying increasing utility bills and the overall state of the economy.  More than two-thirds of those surveyed said that they would put spare cash into improving finances by increasing savings (40%) or paying off debt (29%).  Among the areas facing spending cutbacks: home improvement, new clothing, new technology and out of home entertainment.

“We are in the foothills of what will be a slow climb out of recession.  While people are feeling ever so slightly better about job prospects and finances, an air of caution prevails.  The number of people saying they are saving is at the highest the consumer confidence survey has ever recorded, and people remain very concerned about the amount of debt they are shouldering,” said Justin Sargent, Managing Director, Nielsen Consumer UK. 

“We’re heading in the right direction.  It’s encouraging to see consumer confidence improve steadily since the survey’s low last April.  But we’ve still got a long way to go before confidence levels hit their pre-recession highs,” said Stephen Robertson, Director General, British Retail Consortium.

“People are still shopping around the major supermarkets, hunting out the best deals.  The most recent Nielsen research also suggests that family shoppers remain cautious, which may be taking the edge off current sales.  Indications are that shoppers could be holding back until the middle of December, which could result in a massive last week of trading,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

Some key findings include:

Advertising: Some advertisers actually increased their ad spending during the first twelve months of the UK recession (July 2008 to June 2009).  Grocer ASDA increased its spending 40 percent during this period, while the government’s Central Office of Information boosted spending by 33 percent to back campaigns about the dangers of smoking and drinking, the HPV vaccine and swine flu.  Meanwhile, a number of big brands cut their ad budgets significantly: P&G was down 15 percent, Toyota off 57 percent and Tiscali, an internet service, down 92 percent.  With the exceptions of Audi and Seat, auto manufacturers all cut spending, from Hyundai (-6%) to Lexus (-66%).

Jobs: Total job vacancies – both online and in print – dropped from about one million in January 2007 to approximately 500,000 in September 2009.  The number of jobs in IT, secretarial, construction and sales has each fallen by more than 50 percent between July 2008 and June 2009.  Positions within education, social services and hospitals/medial have been the least affected, with the latter actually showing a year-on-year growth of around two percent.

Consumers: British consumers continue to be frugal when it comes to shopping. Two-thirds said that they planned to spend less on clothes, while 59 percent said that they are looking to save on gas and electric bills.  Both of those figures are a slight improvement from surveys conducted earlier this year.

“Despite some confidence returning, a legacy of the recession will be the desire amongst consumers to continue to spend less on both grocery brands and financial service products.  Many leading brands have adapted well to this change in consumer behavior to date, but the real test will be how they cope with this intent long term,” said Nikki Williams, UK Managing Director at Nielsen’s Media division.

Read the full press release.

So what are Brits doing with their smartphones?  Mobile web browsing was the fastest growing activity, with 10.4 million using that function in the third quarter, up from 8.8 million in the second quarter.  Downloading applications was the second fastest growing activity, with 1 million new users in the third quarter to 4.1 million.

“Although there have been sizable increases in the take-up of new mobile technologies such as video and location-based services, they remain niche forms of behavior,” said Edward Kershaw, Vice President of Mobile Media at Nielsen.  “The era of the handset as a truly multi-media device on a mass-market level lies somewhere on the horizon, and the key for companies to successfully harness mobile lies in a realistic understanding of what activities people on a large-scale are actually doing with their handsets now.”

Perhaps as a sign of the times, the second and third fastest growing sectors were food and cooking, which saw a 56 percent increase in unique UK visitors, and coupons and rewards, up 55 percent.  Promotions offering discounts on holidays boosted traffic to Ribena’s site, from 12,000 unique UK visitors in July 2008 to almost 950,000 in July 2009.  Coupons and rewards web sites saw 10.9 million visitors in July 2009, up from 7 million a year ago.  The ability to earn reward points or getting discount vouchers towards purchases drove traffic to sites such as Nectar and MyVoucherCodes.co.uk.

“Although saving money is a major theme across the fastest growing online sectors, the variety of sectors – from mobile phones to food and cooking, from automotive and health to technology and parenting – shows the diminishing areas of daily life that aren’t being significantly enhanced or touched by the Internet.  Strong growth online isn’t just about social media,” said Alex Burmaster, Communications Director at Nielsen’s Online Division in the UK.

Read the full press release.

“The poor weather resulted in shoppers making fewer shopping trips this year.  But with grocers increasing promotional activity, with 33 percent of sales this month being on promotion, we expect monthly growth going forward to be in the 4 to 5 percent range as food inflation continues to slow,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

Of the top 9 grocers, Waitrose continued to perform well with double digit growth of 10.5 percent for the quarter and more than 11 percent in the last four weeks.  Asda, Sainsbury’s and Morrisons continue to grow at the expense of smaller retailers, while Tesco has launched a new customer loyalty scheme to intensify the battle for shoppers.

“With shopper promiscuity increasing and loyalty levels falling over the longer term, the added benefits of Tesco’s Club Card 2 may do the trick in keeping Tesco customers loyal to the shop and ultimately spending more of their money there,” said Watkins.

“Shoppers continue to respond to offers, with another all-time high for promotional spend at 33 percent of fast moving consumer goods spend in the last four weeks.  As a result, all retailers are attracting new shoppers, but their loyalty and commitment are likely to be lower,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

Sainsbury shoppers increased the frequency of their visits by 6 percent in the last four weeks, while ASDA showed strong growth in grocery and general merchandise. 

“The recent wet weather, combined with the start of the school holiday could make the level of improvement short-lived.  However, last year was a washout both in terms of weather and sales, so we are still likely to see good year-on-year improvements from food retailers over the rest of the summer,” said Watkins.

“Waitrose has gained strong momentum going into the summer, which is the time of year that brings incremental sales of fresh foods.  With new stores opening and a major media campaign in early June to support the launch of the retailer’s new private label offerings, the outlook, based on recent performance, is positive,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

“With a record of 32 percent of all sales being goods on offer in the four weeks to May 2009, retailers recognize that they need to show good value for money as a fundamental shift in consumer behavior has taken place over the past few months.  At face value, this will be good news for Asda, Tesco and the other discounters, but it is also an opportunity for all other retailers to get a bigger share of wallet of the recession-struck shopper,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

% Share of Grocery market Spend, 12 Weeks Ending May 16, 2009