Value has become a main focus for Asian shoppers, partly driven by the economic situation and partly as a result of increased retailer activity focused around price and promotions. According to Nielsen’s Asia Pacific Retail and Shopper Trends 2009 Report, more than 70 percent of shoppers claim to have become more price sensitive compared to last year. The effect: shoppers are more inclined to buy only what they need, spending their money on essentials rather than on treats or what they now consider ‘nice-to-haves’. They’re also consciously trying to cut down on the quantity purchased and are actively seeking out products on promotion.

Over the course of 2008 in Asia, grocery markets continued to show volume growth, led by India (+9%), China (+9%) and Vietnam (+18%), with only Taiwan (-7%) experiencing a decline in sales. Value sales increased by double figures in many markets on the back of high inflation for key food categories. But with inflation falling in all markets, we have seen value growth drop sharply in 2009, although overall volume growth in many markets has held up reasonably well with shoppers not cutting back significantly on grocery categories.

Traditional trade continues to lose share

As expected, the traditional counter service trade continued to lose share in Asia, with overall share of trade dropping another percentage point to 47 percent in 2008. At the same time, the absolute number of traditional grocery stores in the region grew by one percent to over 12.3 million stores. In most developed countries, traditional store numbers fell by five percentage points or more. In Korea, where traditional store numbers dropped by nine percentage points, the share of trade decreased from 15.9 to 13.9 percent, while in Taiwan the traditional trade now accounts for just over six percent of sales, having lost 1.5 percent share in the last 12 months.

The retail landscape looks very different in Southeast and South Asia, however, where traditional store numbers actually grew year on year, and even though share of total grocery sales continues to decline slowly, the majority of shoppers in all markets continue to shop at this trade channel. The traditional channel continues to meets shoppers’ needs for everyday convenience, personal service and affordability – being able to buy the smallest sizes and quantities.

Growth of small modern trade outlets

Globally, many large retailers such as Wal-Mart, Tesco and Carrefour have embraced a multi-format strategy that includes the development of smaller neighborhood stores. Similar growth in small modern trade outlets is also being seen across Asia, with mini-markets/small supermarket store numbers increasing by 17 percent in 2008 to over 100,000 stores.

Indonesia has led the way over the last 10 years and in 2008 more than 1,500 new stores opened, taking the total to over 10,500. These stores now account for more than 16 percent of total packaged grocery sales. Shoppers in Indonesia are continuing to embrace the convenient location, relatively good service and acceptably low prices offered at mini-markets.

Retailers in China are also investing in this store format, with store numbers growing by 22 percent in 2008 to more than 70,000 stores, accounting for more than three-quarters of all modern self-service outlets.

In South Korea we are also seeing the leading Hypermarket operators expanding into small supermarket formats, or ‘Super Supermarkets’ as they are known in South Korea. Samsung Tesco is now operating over 150 SSM Homeplus Express stores and E-mart is planning to open 30 or 40 small, 300 square meter E-Mart Everyday stores. The expansion of these large chains into the small store arena has led to concerns regarding competition with small store owners, and the South Korean government is considering introducing a bill to regulate the opening of small supermarkets.

So what are the top selling categories in the drug channel? Six of the top eleven categories are outside the health and beauty care category.  Tobacco leads the way with almost $3 billion in sales, an increase of 18 percent from last year.  Cold/allergy remedies, nutritional supplements, headache remedies and chocolate candy round out the top five.   In terms of growth leaders, pet care products posted a 67 percent increase from last year, followed by depilatories and peanut butter.  Of the eleven categories showing the strongest growth, eight are foods.

But the leading chains such as Walgreens, CVS and Rite Aid are stepping up their efforts to innovate and bring more customers through their doors.  As with grocery stores, private label products are increasing their share of sales, with store branded cold/allergy remedies, nutritional supplements and headache remedies leading the way. Meanwhile, private label pet care, laundry detergent and antacids have shown the most growth.  Some of the chains are establishing in-store medical clinics, where customers can receive services such as blood pressure screenings, treatment for common maladies and flu shots.   Others are making the shopping experience more efficient by re-designing stores and reducing SKUs. 

“Drug retailers are feeling the heat from mass merchandisers and other retail channels.  Look for drug stores to innovate and evolve with more in-store clinics, competitive store brands, and expansion beyond traditional health & beauty categories,” said Tom Pirovano, Director of Industry Insights at Nielsen.

Other drug store facts:

• Drug store shoppers spend nearly twice as much on cigarettes than on cold/allergy remedies.
• Drug stores dominate all channels in the sale of contraceptives, generating 64 percent of sales in the category.
• The two highest growth categories in terms of share for the drug channel are tobacco and feminine hygiene.
• The category that has the highest drug channel private label share: canned nuts (64%).
• The Cleveland market has the strongest drug store channel representing 8.6 percent of total sales compared to 3.8 percent for the U.S. as a whole. Miami, Boston, New York and Sacramento round out the top five.
• Denver, Salt Lake City, Portland, OR have lower-than-average sales in the drug store channel
• Drug stores skew to African Americans, households without kids, lower incomes and older households than other channels
• Where one lives plays a huge role in the channels one shops: those living in cosmopolitan centers and struggling urban cores spend more of their money in drug stores than those in suburbia or rural communities.

Chain stores, such as 7-Eleven and BP, account for more than 52 percent of C-Stores, while independently owned stores make up the balance.  That said, only 14 percent of C-Stores are from chains with more than 500 stores; the rest of the chain stores are part of local or regional companies such as WaWa, Get Go and Nice N Easy.

So what makes one store more successful than another? Execution.  “According to Nielsen research, consumers want convenience, obviously, but they also want a clean, organized store and the ability to check-out quickly,” said Tom Pirovano, Director of Industry Insights at Nielsen.

C-Stores dominate a number of high-volume categories such as tobacco (85% share of all channels), ice (57%) and beer (56%) and they outsell food, drug and mass merchandisers (including Walmart) combined in these categories.  C-Store sales of tobacco and beverages generate more than $90 billion annually.

A Convenience Store News Nielsen survey found that customers want their stores to offer gas, snacks and prepared food, a category that has shown growth as the quality of those food service items has improved.  Doughnuts and muffins are the top prepared food category, followed by sandwiches and hot dogs.

“Stores that offer prepared food that looks fresh and smells good and cross merchandise those with other items are likely to hit a homerun,” continued Pirovano.

Despite their seeming ubiquity, the challenges facing the C-Store channel are numerous: rising credit card fees, competition from small format groceries, a desire for healthier foods and competition from club and mass retailers selling gas are just a few of the issues C-Store owners face.

“The key to success is innovation.  C-Store retailers need to constantly fine-tune their offerings in the face of increased competition from other channels while never taking their eyes off the basics of cleanliness and efficiency,” said Pirovano.

Other C-Store Facts:

• Texas leads the nation with more than 14,000 stores, followed by California and Florida
• Nevada showed the most growth in the last year, with 31 new stores coming online
• C-Stores skew to African Americans, smaller households without kids, lower-income households and single males.
• Seattle, Dallas/Ft. Worth and San Francisco lead metro areas with the most C-Store growth, while Miami, Houston and Tampa showed the steepest declines.

The beginning of the year brought some surprising good news for retailers: retail sales (excluding automotive) rebounded in January and February.  While the figures were not earth-shattering – sales grew 1 percent and January and 0.7 percent in February – they were significant improvements on the last four months of 2008, where declines ranged from 1.2 percent to 3.1 percent.

Using data collected by the Nielsen Homescan Consumer Panel, we saw improved trip performance in the first two months of the year in most channels.  Exceptions were drug stores, which were affected by a weak flu season, department and toy stores.

[click to view full graphic]

While we expect that March will be weak, due primarily to Easter falling later this year, signs seem to be indicating that we may be near a bottom of the economic downturn.  Data from the second quarter will be critical in determining whether renewed growth is on the horizon, or if we are in store for several more months of decline.

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

“Big Players Think Small in Format Fights,” an article in Consumer Insight by Todd Hale, senior vice president, Consumer & Shopper Insights with Nielsen, outlines how the economy is affecting retail channels and what some retailers are doing to attract new customers. For example, the key grocery chains are launching smaller stores in urban areas with a focus on packaged fresh food offerings. Tesco launched the Fresh & Easy format in 2007, with plans to open 200 stores by the end of 2009, while Walmart is fine tuning its own small scale pilot, with a strong fresh and private label emphasis with their Marketside format. Safeway opened The Market at Vons in Long Beach, while Supervalue opened a prototype called Urban Fresh in the Chicago area. The stores feature upscale inventory in bright, well-organized layouts with sampling stations near fresh sections, a robust private label offering and designed to appeal to both those who like to cook from scratch and those who like prepared foods.

“From alternative formats to alternative merchandising and assortment ideas, 2008 proved that a marketing opportunity lies behind every perceived market downturn. If big stores no longer make economic sense, downsize the footprint. If consumers are cocooning and watching movies at home, bump up your DVD catalog. When competitors co-opt traditional product lines, diversify by adding services that distinguish your format and build loyalty,” said Hale.

To read more about format changes, channel trends,. ad spending and other ways retailers are evolving with the economy, view the full article here

The participants were Todd Hale, Senior Vice President, Consumer & Shopper Insights, Nielsen U.S.; Jonathan Banks, Director, Retail Insights, Nielsen Europe; James Russo, Vice President of Marketing, Nielsen U.S., and; Jean-Jacques Vandenheede, Director, Retail Insights, Nielsen Europe.  Key themes were:

Consumers: It does not matter where consumers live – they share a common goal: to get the most for their money.  They are focused on value and are taking advantage of deals.  And they have re-focused on the essentials: “If you can’t eat it, you don’t need it.”  Higher incomes have not been immune: the shopping and spending habits of all income levels have been affected by the economy.

Retailers: As a result of this changed consumer behavior, food retailers are faring better than most others.  Private labels’ share is growing in many categories and in many countries, and offers an avenue of growth for many retailers.  In the U.S., Kroger has gone head-to-head with Walmart with matching prices on food basics.  Supercenters and dollar stores are also benefiting from the shift in consumer behavior.

Consumer product manufacturers: Brand development and innovation are more important than ever: “History tells us that really great brands have been launched in the middle of recessions where advertising can cost less.”  Manufacturers are struggling with determining the duration of the recession and how to plan for recovery. Opportunities will be found by aligning with evolving consumer behaviors such as fulfilling basic over discretionary needs, trading down and a focus on value.

Looking Ahead: Caution and uncertainty are the operable words.  Now is the time to plan ahead and develop an exit strategy out of a crisis. The biggest opportunities will be found by aligning with the deepening consumer behaviors that have been occurring since the beginning of 2008.  As the economy slows, these behaviors will intensify.

Read the whole discussion in the February issue of Consumer Insights.

• Market Index volume, in terms of unit and country currency change
• Retail channel shifting
• Shopping frequency and spending trends
• Overall consumer confidence

“Nielsen collects and analyzes data on tens of thousands of products around the world. As we were thinking of new ways to leverage this valuable resource, we thought it would be useful to summarize this information and create a monthly snapshot of consumer and retail trends across the globe. We expect that the Nielsen Economic Current will provide our clients and others with another valuable tool for evaluating these trends at both a macro- and microeconomic level,” said Todd Hale, Senior Vice President, Consumer & Shopper Insights at Nielsen.

In addition to global and regional components, the Economic Current will follow trends in eleven countries representing over 70 percent of Global GDP.  Countries were chosen based on their importance to the overall global economy as well as countries where Nielsen captures a broad set of consumer, retail and media content. The countries which the Economic Current will track on an individual basis are:

• United States
• Canada
• France
• Germany
• United Kingdom
• Italy
• Spain
• Brazil
• Russia
• India
• China

Over the course of the next week, Nielsen Wire will feature brief summaries on key sections of the latest edition of the Economic Current. In the months ahead, new editions of the Economic Current will be supplemented with podcasts by senior executives and analysts who will provide further insight on global consumer trends.

For the complete report, click here.

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.