SUMMARY: When the recession ramped up, retailers responded, passing along gasoline and commodity savings to shoppers, cutting prices to sharpen their competitive edge and leveraging EDLP strategies. Consumers also responded by clipping coupons and purchasing store brands to help ease the strain on the family budget. The net result: weak or declining sales on a department, category and same-store basis. Retailers should be highly selective about which categories get earmarked for price reductions in order to realize a sustainable volume competitive advantage.

Pricing these days is a balancing act. Cash-strapped consumers are pinching every penny and comparing prices across formats, forfeiting convenience for savings. Retailers have gamely responded by sharing cost concessions, but when retailers roll back prices en masse, two things happen: 1) no single retailer enjoys a competitive advantage from price cuts, merely maintaining parity with respect to traffic, and 2) category volume increases slightly, but not enough to offset the price decline.

Consumer packaged goods unit prices have nosedived in 2009. For example, as of March 2009, Nielsen research showed prices up 4.1% over the prior year, but dropping precipitously for the next few months as price increases ranged from just 1% to 1.9%. This stands in stark contrast to January results, marked by a 5.5% unit price increase across the store, more consistent with the aggressive 2007 and 2008 pricing patterns.

Handle with care
While food staples like cheese, milk and fresh eggs led the pricing pack in 2008, those price points proved to be highly perishable. Last year’s price leaders, according to Nielsen, became the biggest losers in 2009, with eggs scrambling to maintain profitability after a 23.8% price plunge to $1.63 per unit. A carton of milk sank 19.3% to $2.38 per unit, while cheese prices were shaved by 9.6% to $2.75 per unit.

Other poor performers among the 30 categories with the most dramatic unit price cuts were diet aids (slimmed down by 8.8%), baby needs (wiped out by 7.6%), fresh produce (a limp 6.5% decline in unit price), and shortening and oil prices (slid by 6.0%). Not a single category among those recording the greatest declines managed to eke out dollar sales growth. Conversely, five of the seven categories posting the greatest price increases realized dollar sales growth for the four-week period ending in July 11, 2009

Down, not out
Most economists agree that we can expect further contraction of the economy by approximately 2% for the remainder of 2009 and that waning consumer confidence will translate into less spending at retail and lower demand for manufacturers. The key to selectively—and strategically—lower prices is price elasticity of demand.

Nielsen research on pricing and promotion shows that most categories have a price elasticity much lower than -1.0, with most falling into the -.30 and -.70 range. For a sample category with a price sensitivity of negative .40, a price reduction of 10% converts into a unit sales increase of 4.3%, but a dollar sales decline of 6.1%. The recommendation then, is to be highly selective about which categories get earmarked for price reductions in order to realize a sustainable volume competitive advantage.

Clip it or click it
As retailers and manufacturers look to keep shoppers spending—and conversely, saving—they are leveraging ways to simplify the art of coupon clipping and clicking. Multi-tasking consumers are leveraging every possible vehicle for savings, with coupons enjoying an unprecedented resurgence. One reason is renewed reach and accessibility. Thanks to Internet, mobile phone and in-store kiosk distribution methods, coupon redemptions were up 23% for the first half of 2009, and redemption growth outpaced distribution, up by 20%. Key coupon activity stats from Inmar for the first half of 2009 show 188 billion coupons distributed and 1.6 billion redeemed.

The new generation of coupons reflects the immediacy of the media, with shorter expiration periods, fewer multiples and flat values. Food items represent the most active coupon segment and the 80/20 rule runs true to form: during the first half of the year—81% of units purchased with a manufacturer coupon were from just 19% of households. Both low and heavy coupon users have stepped up clipping activity, although all but the heaviest coupon user groups experienced negative total unit growth.

Winning numbers
Free-standing inserts (FSIs), a mainstay of the grocery channel, accounted for 89% of coupons distributed and 51% of coupons redeemed. The second largest category of redeemed coupons was electronic checkout at 10%, followed by instant redeemables at 9%, instant redeemable cross ruff (a coupon that’s on, or inside the packaging of, one product but good for another) at 6%, shelf pads at 5%, direct mail and handouts at 3%, in-packs and the Internet at 2%, and electronic discounts and in-ads at 1% each.

Internet coupon redemptions grew exponentially with a 308% increase over the prior year. Magazine on-page coupons (157%), instant redeemable cross ruff (177%) and direct mail (168%) enjoyed triple digit growth as well. While redemptions for FSIs were up 31%, only 0.5% of distributed FSIs were redeemed—a much lower redemption rate than what was experienced by all other forms except for magazine on-page coupons.

Well-heeled clippers
Coupon users represent an appetizing demographic comprising younger female heads of household (54 years old and under), larger households, and more affluent families ($70k+ annual income) who reside in areas designated as “comfortable country” or “affluent suburban spreads.”

Typically, coupon enthusiasts are frequent shoppers and bigger trip drivers who patronize most retail channels serving the consumer packaged goods industry. While non- and light-coupon users book bigger shopping trips—stocking up because of the lack of frequency—coupon enthusiasts represent the second biggest per-trip spenders in the grocery channel.

Store brands soar
In every downturn, there’s a beneficiary, and at grocery, it’s private label. For the year ending July 11, 2009, store brands hit an all-time high for dollar (16.9%) and unit shares (21.5%). Even as store brands continued to flex their marketing muscle in edible categories, they also racked up gains in the non-food, health & beauty and general merchandise departments. Lead brands—the number one or two brand when a store brand was the category leader—generally held their own against the onslaught of private label. Private label share gains were primarily at the expense of all other brands.

Store brand sales levels and growth are still skewed to edible categories, but store brand growth (not share) in non-food, health and beauty, and general merchandise departments has been generally stronger than brands. Store brand share development is greatest in commodity categories (e.g., milk and eggs) or those with little differentiation (e.g., first aid and pain remedies). As might be expected given their value positioning, store brand development lagged in categories with high levels of marketing support and those requiring high levels of innovation like beer, candy and health & beauty.

Accelerated development
What’s behind the surge in store brands? Which shoppers are most likely to purchase store brands at an account? Do their brand preferences differ by department or category? Shopper behavior across lead retailers within four different formats was analyzed, drawing on Nielsen consumer panel data.

Topline results reveal that the Kroger demonstrated the greatest—and most consistent—growth in store brand sales from low to very high spenders. Slower store brand growth was detected at Costco and Walmart, with Walgreens ringing up a second place ranking on store brand sales growth. In all four retailers, shoppers (even among very high-spend shoppers) are far more likely to seek branded offerings when shopping competitive retailers. Retailers need to understand if competitive shopping is driven by not having the right branded assortment in their stores or from competitors offering greater branded value or less store brand focus.

Walmart was the only retailer where their shoppers devoted a greater share of their total spend to store brands when shopping in competitive retailers.

While brands drive the majority of category dollar and unit sales, further store brand expansion is likely given the slow rate of economic recovery and the strong retailer focus against store brand label initiatives. Kroger, Walgreens, Walmart, SuperValu and other retailers have expressed the desire to expand store brand presence along with assortment cuts to reduce store clutter and improve store shopping experience. And retailer store brand focus has never been greater as there are better quality offerings, expanded assortment, and increased marketing muscle and support.

Small and mid-tier brands remain at risk from private label poaching as retailers push to shelve house brands. Unless these smaller brands are unique or niche brands, their manufacturers may initiate or expand into private label contracting or pursue direct-to-consumer options. In any case, these brands need to proactively leverage analytic insights to demonstrate why their brands are deserving of shelf space.

Tread carefully
A word of caution to retailers: don’t let price gaps between store brands and brands get so large that they drive declining category sales. While price decreases benefit consumers, both manufacturers and retailers would be rewarded with lower sales. And with more and more consumers turning to coupons in this tough economy, continue to make usage easier with increased distribution and delivery methods. Finally, promote store brands with brands where there is limited shopper overlap to drive category sales and along with non-competitive or complimentary branded offerings to build larger baskets.

With the nation seemingly emerging from recession, American consumers remain skittish about spending their money during this upcoming holiday season according to new research from The Nielsen Company.  Households continue to focus on “essential gift giving” such as staple consumables, candy, beverage/alcohol and entertaining at home, and 86 percent said that they expect to spend the same or less this year than last — with a 7 percent increase in those indicating they would spend less.  Overall, Nielsen is projecting that holiday sales will rise 0.03 percent this year, accounting for $90 billion in dollar sales.

“Given everything the consumer has absorbed over the past 12 to 18 months, the fact that we expect this coming holiday season to be flat in dollars can be viewed as a modest positive,” said James Russo, Vice President, Global Consumer Insights at The Nielsen Company. “Americans have undergone a fundamental change in how they spend their money, and the days of stretching finances to make purchases not deemed as necessary are over, at least for the time being.  That said, our research has shown that consumers are looking forward to loosening their purse strings a bit, but only once they feel more confident about the state of the economy and their personal financial situation.”

Update: James Russo Discusses Holiday Spending on CNBC

Other key findings from the research include:

• Traditional items such as apparel, toys and technology will be most popular categories, albeit at restrained levels and primarily sold in “value” channels.
• Products aligned with at-home entertainment such as cookware, kitchen items, bed and bath accessories and alcoholic beverages will do well.
• Gift cards are one category where consumers plan to spend more this holiday season, followed by toys and apparel.
• Value retailers such as dollar stores, online, discounters and club stores will attract the lion’s share of holiday spending as consumers minimize trips and search for the best values, while office supply, pet stores, home improvement and drug retailers are likely to feel the brunt of the economic slowdown.
• Some 20 percent of households said that they had no plans whatsoever to entertain at home or away from home during the holidays.
• Spending cut-backs are being driven by all income groups.

So how can retailers make the most of this season? They need to recognize that U.S. consumers are, first and foremost, seeking value and will start their holiday shopping well before Thanksgiving.  They should also reach out to their best customers and make them feel special and give them a reason to shop at their outlet during the season and into 2010.   Successful retailing has always been about delivering the right product at the right price and in the right place.  The difference now is effectively mining and communicating to the right consumer as an active participant in driving growth.

Increases in wine and alcoholic beverages indicate that consumers are opting to consume their favorite beverage at home too. At the same time they are continuing to avoid discretionary items, according to the latest monthly update of U.S. Retailing & Consumer Trends from The Nielsen Company.

The non-edible departments were the greatest contributors to an overall 1.2 percent unit sales decline at food, drug and mass-merchandisers, during the 52-week period ending July 11. General merchandise categories suffered most with a decline of 7.9 percent. Non-foods dropped by 3.8 percent and health and beauty aides by 3.5 percent.

Canning and freezing supplies saw the greatest unit sales increases at 18.1 percent followed by seasonal merchandise (8.3 percent), fresh meat (6.2 percent), wine (5.6 percent) and dry mix prepared foods (5.2 percent).

There was also a 3.7 percent unit sales increase in vitamins, a category that typically does well during times of recession as consumers focus on maintaining their own health.

“By and large the categories that are growing the fastest are those related primarily to meal consumption-a notion of back-to-basics,” says Todd Hale, SVP, Consumer and Shopper Insights at Nielsen. “It’s also interesting that the No. 1 item on the list is canning supplies. There’s been resurgence in consumers growing their own fruit and vegetables and canning them.”

Across all departments, dollar sales over the latest 52-weeks experienced a 2.7 percent increase, which was mainly seen in edible department. Fresh meat had the largest increase at 9.7 percent followed by packaged meat (6 percent), dry grocery (5 percent) and alcoholic beverages (4.6 percent). Discretionary departments and the dairy department, which has experienced significant price reductions as a result of falling commodity prices, ranked in at the bottom of the dollar growth scale. Non-foods (3.1 percent) and health and beauty aides (0.1 percent) showed little growth. Dairy (-1 percent) and general merchandise (-5.0) were the only departments reflecting loss.

“As prices for many commodities have dropped this year, retailers are slashing prices broadly to lure shoppers who are very focused on value and low prices,” said Hale. “As their competitors follow suit with price cuts, we are already seeing a number of retailers struggle to maintain positive same-store-sales growth.”

While food staples were also prevalent in the top-15 dollar growth categories, seasonal merchandise and canning and freezing supplies saw the largest increases with 34 percent and 27 percent growth respectively. Dry vegetables and grains, flour, and pasta, all with gains of 18 percent or more, rounded out the top five.

Moving forward, “we’re going to continue to see consumer restraint in terms of where they shop and how they buy,” said Hale. “Food and beverage categories will continue to do reasonably well. Those manufacturers selling discretionary categories are going to have to work very hard to give consumers a reason as to why they should be buying now.”

Peter Leimbach, V.P., Multimedia Sales Research, ESPN

SUMMARY: Over the past 20 years, the American household has changed and traditional roles have shifted with men now taking on a greater percentage of the household shopping than in the past. Today, almost one-third of men are now the principal shoppers in the home. With more men in the aisles, marketers need to better understand how they impact brand sales and how to reach this growing segment of principal shoppers.

The past two decades has seen a role reversal of sorts taking place: the traditional roles of men and women are being redefined to better reflect today’s social norms. Today’s American households are looking less like Donna Reed—the paradigm for the ideal 1950’s family—and more like Mr. Mom.

Shifting norms
Since 1985 there has been a dramatic shift in the composition of male principal shoppers in the U.S. Several factors are contributing to this trend. First, the traditional family unit has multiple variations today. From two working parents to single parent homes, a younger generation is being exposed to new norms. Second, Americans are waiting longer to get married. According to the U.S. Census Bureau, in 2008, the median age at first marriage was 27.4 for men and 25.6 for women vs. 25.9 for men and 23.6 for women in 1988. Lastly, Americans are living longer and as Baby Boomers retire, the men of that generation are shopping more than their fathers or grandfathers ever did.

Today, almost one-third of men are now the principal shoppers in the household. With more men in store aisles, marketers need to better understand how to reach this growing segment of shoppers.

Increasing presence
Business Week reported in a September 2006 article, “Secrets of The Male Shoppers”, that “men buy, women shop: the sexes have different priorities when walking down the aisles”. This is an important distinction for marketers to consider when targeting male shoppers.

Nielsen data shows that while females dominate shopping trips in all channels except convenience/gas stores, their share of trips has declined in all outlets from 2004 to 2008/2009. On the other hand, men’s share of retail shopping trips has done just the opposite—increased in all outlets. The channels with the greatest relative importance to men include convenience/gas outlets, warehouse clubs and grocery stores.

And while females out spend male shoppers per trip across all retail channels, the average basket size spend differential is not as large as might be expected. The fact that women conduct more “planned” shopping trips than men is one explanation for the higher dollar amount..

Overall, men are substantially increasing their average dollar basket size across all channels—especially in grocery where they have increased spending by 56% over a five year span. Additionally, while their share of spending is growing across all retail outlets, women’s share of spending has declined. In the grocery channel, men’s share of dollars increased from 30% to 38%—a 27% increase versus women’s decline of 11%.

Not just beer and brawn
A shopping report commissioned by ESPN to evaluate Nielsen sales data based on the presence of the male head of house as the primary or secondary shopper on a trip revealed some unexpected findings.

From 2006 to 2008, there has been an upward trend in both the amount of dollars spent by men and their shopping frequency. The occasions when males were the primary or primary/secondary shopper have increased by 4% and 3% during this two-year time period and the total dollars spent has increased by 8% and 7% respectively.

And while a high percentage of dollars spent by men are in fairly predictable categories such as grooming care products and alcoholic beverages: men’s hair coloring (86%); men’s depilatories (84%); gin (83%); scotch (81%); and pre-shave cosmetics (80%), a peek inside their shopping basket reveals they are likely shopping for the family too.

More than half of the principal male’s shopping basket consists of items that indicate they are not just shopping for themselves.  Examples include:

• Men’s External Breathing Aids (61%)
• Canned Seafood (61%)
• Refrigerated Juices, Drinks (61%)
• Prepared Food-Ready-to Serve Stew (59%)
• Herbal Package Tea (57%)
• Prepared Food-Ready-to Serve Lasagna (55%)
• Health Bars & Sticks (54%)
• Non-Sliced Refrigerated Lunch Meat (53%)
• Refrigerated Yogurt and Shakes (52%)
• Dishwasher Rinsing Aids (52%)

Impact on media strategy

Advertisers need to evaluate the importance of men’s purchase volume for their brand and competitive brands and determine whether the current media mix appropriately reaches men purchasers. Traditional media tends to fall into 3 categories:

1. Programming that skew primarily female (network soap operas and female-targeted cable networks like Lifetime and Oxygen)
2. Programming with evenly skews male/female (network prime time, broad-based cable networks like USA Network)
3. Programming that skews male (primarily sports networks)

Nielsen conducted an analysis to determine how well a given media schedule was delivering both male and female brand users for a leading brand in the cold remedy category. The findings revealed that men accounted for 48% of brand users and 48% of brand sales came from shopping trips where the male head of house was the primary/secondary shopper.

And while the advertiser’s schedule included a wide mix of broadcast and cable networks, it focused primarily on targeting women and adults. Sports networks accounted for only 2% of the schedule’s GRPs. This mix resulted in a schedule where only 38% of the brand target impressions fell against men—far less than their share of brand spend.

Continued quest
The male as a principal shopper is not an emerging trend, as marketers have been struggling to understand this segment for over 20 years. But as marketers learn more about where and what this consumer segment buys, they are better able to guide brand positioning and media targeting to capitalize on this target when they are in the aisles.

Of key interest to advertisers is the finding that 95 percent of teens notice some type of advertising at the mall, with display ads, hanging banners and displays where samples can be tried the most effective.  View the full study, free of charge, here.

“The findings show that teens do in fact notice advertising in the mall, and our study shows that they generally rate it positively,” said Jane Traub, senior vice president of research for Scarborough.

Read the full press release regarding Scarborough’s study here.

Todd Hale, SVP, Consumer & Shopper Insights, and George Wishart, Global Managing Director for Nielsen In-Store Services, The Nielsen Company

SUMMARY: Inspector Gadget has taken up residence in retail stores, with coupon-dispensing kiosks, Web TV cooking programs, self-checkout scanners, smart carts picking products based on grocery lists, text reminders of last minute items, and Internet sites that track purchases and analyze nutritional content. Technology is changing the rules at retail.

Reaching consumers is both easier and more complex as outreach options proliferate. With the growth of cable and satellite, TV channel availability has more than tripled since 1990. And while traditional vehicles are still vital, more immediate and ubiquitous media are taking a hold. Online and mobile video viewing is exploding and time-shifted TV is growing.

Market-leading retailers are learning to embrace new media technologies, incorporating them into the promotional arsenal even as paper coupons enjoy a resurgence of interest. Everyone’s feeling the pinch from a volatile economy and looking for ways to conserve. As a result, manufacturer-driven coupon redemption in the U.S. surged nearly 10% in the fourth quarter of 2008, according to Inmar CMS Promotion Services.

For the year ending February 2009, Nielsen determined that more than one-third of dollar sales at food, drug and mass merchandiser stores were sold on promotion in the U.S., accounting for some $133 billion excluding coupons. Inmar determined that, while manufacturer FSI coupons represent roughly 80% of redemptions, manufacturer online coupons comprise the fastest-growing subset.

Web wise
Online merchandising is beginning to make inroads at many retailers, although for some, web pages often mimic the layout and look of printed weekly feature advertisement inserts. However, many manufacturers—especially those in the health and wellness field and discretionary categories like carbonated beverages and candy—are taking full advantage of the web’s highly engaging interactivity by featuring sites with games, e-cards, activities, videos, commercials, recipes, ring tones, personalized planners, and clubs that include special discounts and reminders.

In a recent U.S. study, Nielsen measured more than 200 digital ad campaigns which averaged a 32% sales increase, $1.1million hike in short term incremental retail sales, 157% return on investment, 18% boost in penetration and 14% surge in the buying rate. Impressive results all, signaling the strength and potential of visually-exciting, content-rich, interactive digital media.

Niche players like Dollar General keep their online outreach focus narrow to enhance impact, addressing just three primary areas on their web site: pets, easy meals and store brands. Others take a different tack and adopt the posture of trusted friend and resource like the Walgreens monthly Wellness online newsletter and news service covering everything from drug interactions to seasonal health challenges to caregiver support forums.

Retailers had best hone their electronic marketing chops quickly. Waiting in the wings to take a bite out of brick-and-mortar grocery sales are two companies that excel at marketing online and are hungry to expand into food: Amazon and AOL.

Getting personal
Food Lion’s Bloom format encourages consumer engagement via Breeze kiosks that feature handheld scanners that enable consumers to scan and bag as they shop, see a running total and speed-up checkout. Freestanding Breeze info displays allow shoppers to check prices, retrieve shopping lists, find and print recipes, and even generate bar-coded price stickers for random weight items.

Ahold’s Stop & Shop chain deploys self-scanner and kiosk technology in many of its stores to enhance consumer convenience. Shoppers enter stores, place their deli orders via a kiosk, finish the rest of their shopping and pick-up their custom order at the deli counter, without having to queue in line.

Ukrop’s Super Markets developed the Savings Spot to leverage the value of its frequent shopper program. Valued Customer program members insert their card into the kiosk, and seconds later, it dispenses as many as eight product offers reflecting individual customer preferences based on prior shopping history.

Simply mobile
With the declining performance of traditional media outlets like newspapers, marketers are exploring emerging vehicles which operate on mobile platforms such as social networking, texting, video and tailored promotional codes and coupons. The iPhone opened up a whole new world of more than 25,000 applications covering every interest and need—from budgeting to calculating tips to bill paying to shopping. Skeptics waiting to see if iPhones will catch on should take note of the fact that Apple can boast more than 800 million downloads and counting.

Mixing it up
Not all marketing is created equal or enjoys equal impact on consumer segments. Even within a store environment, different media and positions generate vastly different impressions. Take this recent example from a Nielsen U.S. study, where gross impressions per store for carbonated beverages delivered a high of about 32,000 exposures for an endcap runway display positioned front-of-store, versus a low of barely 5,000 for a household cleaning aisle endcap.

Another look at differences by type of marketing vehicle and store location established that an in-store flyer ad provided a sales lift of 18%, followed by a slat/wall display at 17%, case stacker display at 16%, shelf coupon dispenser at 14%, endcap display at 13%, power wing display at 12%, freestanding display at 8% and shelftalker at 4%. These huge lift differences among the various displays located in different parts of the store indicate that there will potentially be big sales variations as retailers continue to deploy new marketing strategies using emerging technologies.

A word of caution, however, is necessary.  Without coordination among the various technology platforms, there is the potential for adding clutter and potentially conflicting messages.  A plan that has inconsistent ad space coverage on everything from the in-store radio network to the deli/produce and check-out screens may turn out to be a noisy mess.

Paperless future
If media diversification and proliferation continue apace, marketers can expect feature ads as we know them to disappear over the next five years. Coupons will go paperless and coupon delivery will occur in-store and in-aisle—literally at the point of purchase. Shoppers will deploy mobile devices to seek out and “pull down” messages ranging from recipes to promotions as they shop the store.

Consumers hungry for recipe ideas or product recommendations can text or “tweet” friends, and visit “foodie” social media sites and blogs for inspiration as they walk store aisles. Traditional ad formats will yield to the immediacy and brevity of vehicles like Twitter tweets, which enjoy the boost of enhanced credibility from peer group product champions.

Human touch
As the media shakeout continues, marketers will be experimenting with different mixes of media and schedules. Given the wide range of consumer technology savvy and comfort levels, retailers will need to embrace the best of the new and retain the best of the old techniques. Self checkout is a prime example of this hybrid strategy. It’s great for small orders and bar-coded items, but still requires a human intervention for random weight items requiring help with PLU codes or to tweak twitchy scanners.

Even as RFID tags, audio capture, wi-fi, dual sensors, ultrasonic and thermal technology gets integrated into the store setting, employees remain a primary consumer touchpoint. Well-trained, proactive employees serve as the face and voice of a retailer, humanizing the experience as no media can. Human capital remains a significant investment area with unmatched potential for generating shopper loyalty and an impressive ROI.

• Same category, different market: often requires a different shopper strategy — While some universal truths exist within categories across borders, success of activation strategies relate to a variety of factors such as local culture, evolving retailer dynamics, pre-store/in-store decision-making, historical promotion strategy, etc. Nielsen’s cross market and cross-category Shopper Modality studies reveal significant differences in levels of category involvement, experimentation and choice drivers.
• In-store is usually not the best place to start selling — A huge amount of shopper decision-making is made on auto-pilot. Nielsen DeltaQual^TM tells us that shoppers don’t evaluate all products in-store to make the “perfect” choice-they accept the acceptable, according to sub-conscious choice rules which become ingrained over time to form habitual shopping behavior.
• The best shopper activation strategy is to meet consumer needs – Success is more about meeting consumer needs rather than hitting price points. Ensure an appropriate consumer fit for pack size/count/variety/range through understanding occasionality and/or needs-and as those needs change overtime, build in flexibility to adapt.
• Too many promotions are detrimental to brand and category health in the longer term — Scale and frequency of promotions will set up shopper expectations and create a behavior in shoppers which encourages deal-seeking. Empirical data shows that the more shoppers get used to the deals offered by sales and promotions, the more resistant they are to paying full price.
• Siting matters as much as depth of discount for in-store promotions — On average, feature and display alone provides 66% of sales uplift regardless of discounts offered. Focus investments on securing site rather than diluting price point, and shift the discussion and quantify the opportunity with a discount versus no discount.
• Shopper perceptions do not always equal reality — It’s not always about reality, but what consumers believe. Align in-store execution with consumer perceptions-or address the root cause of perceptions: deeply-held beliefs can be hard to overcome.

These and other shopper truths will be explored in greater detail in the April edition of Consumer Insight.

The overall state of the economy has dropped consumer confidence to historically low levels and caused consumers to continue to reduce driving. To deal with gas prices, consumer claims in the areas of combining shopping trips and eating and entertaining at home more often are at level higher than measured when gas prices were at $4 plus.  According to the most recent Nielsen Homescan Gas Impact Study, taken in December 2008, 77 percent of respondents said that they were combining shopping trips and errands to save gas.  57 percent said that they are eating out less, an increase of 5 points since the last survey in June and July of 2008, and 50 percent are staying home more often.  And 64 percent of U.S. consumers are reducing spending, up 1 point since the June/July survey.

To reduce spending, consumers are increasingly looking to use more coupons, switch to private label or less expensive brands, shop more at Supercenters and purchase larger, economy size portions.

“The fact is that even though gas prices have declined to ‘normal’ levels, prices of other goods have increased.  The weak economy – and the nervousness it has caused most Americans – has shifted consumer behavior in ways not seen before.  However, winning manufacturers and retailers will be those who take advantage of the increased time consumers are spending at home and use the right advertising and promotions to capture shopping trips and item purchases,” said Todd Hale, senior vice president of Consumer & Shopper Insights at Nielsen.

To view a PDF of the complete presentation, click here.

The next Nielsen Gas Price Impact Survey will be conducted in June 2009.

2008: Staying In Is The New Going Out
Americans are spending more time in front of their computers and televisions. The reach and frequency of TV, Internet, and time shifted TV use increased notably in 2008, as consumers on tight budgets opted to save money by staying home. 

2008: Economizing Strategies Go Digital
In 2008, 20% of consumer discussions online referenced strategies for managing grocery budgets.  Visits to price comparison websites were also up significatnly this year. 

2008: Private Label Reigns Supreme 
As the economy worsened, consumers continued to shift dollar and unit spending to private label products.  The result: private label shares hit all time highs in both units and dollars at year’s end.  Private label dollar sales averaged about 10% growth in the five four-week periods near the end of the year.  Meanwhile, unit sales growth accelerated, averaging 4% to 5% growth.  In comparison, branded products saw 3% average dollar sales growth and 3% unit sales decline. 

2008: Value Trumps Variety, Convenience
“Value” categories and brands saw greater growth in 2008, compared to the previous year:
- Spam: dollar sales up 14% vs. year ago 
- Ramen Noodles: dollar sales up 30% vs. year ago
- Dry Pasta: dollar sales up 25% vs. year ago
- Bulk Rice: dollar sales up 38% vs. year ago
- Margarine: dollar sales up 21% vs. year ago
- Canned Vegetables: dollar sales up 9% vs. year ago
- Frozen Vegetables: dollar sales up 7% vs. year ago

2009: Retail Stores Close, Consolidate
“A rising tide raises all boats” — the opposite exposes weaker businesses.  The grocery channel may be “recession resistant,” but no channel is “recession proof.”  In 2009, expect further consolidation in retail outlet ownership, as flawed businesses go to the wall or are selectively gobbled up at low prices by “retail winners” looking to expand their presence in key neighborhoods and markets.

2009: Premium Brands Lose Ground; Genetic Modification Gains New Acceptance
In 2009, consumers will become more discerning and discriminating, and the premium charged for more expensive lines will be questioned more frequently.  This will retard the growth of some organic and fair trade products, and maybe even increase acceptance of genetically modified products. 

2009: Food Waste Reduction Is A New Priority
With food waste running at 30% in the U.K. and 40% in India, consumers and manufacturers will make greater efforts to reduce avoidable losses in 2009.  Look for growth of the frozen food category, and smaller portions in food service and single-serve ready meals.

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.