A Changing Market

Retail markets often change with the U.S. economy. Currently, one popular consumer trend is cross-channel shopping, for its value and quality.

Despite gas prices that are more than 30% higher than last year, cross-channel shopping is alive and well in the consumer packaged goods (CPG) industry.

In fact, three-quarters of today’s consumers shop across five or more channels to meet their ongoing CPG needs. Consumers’ cross-channel quest for affordability clearly underscores the mindset of today’s shoppers, where learning to live with less and making purchases deliberately and cautiously has become the norm. To take a closer look at how consumers’ conservative outlook is making a significant impact on CPG channel trends. SymphonyIRI Group Inc. just released its latest Times & Trends Report, “Channel Migration: A Quest for Affordability.”

During the beginning of the economic downturn, shoppers flocked to value retailers, particularly super-centers and mass merchandisers, demonstrating a willingness to drive the extra distance in a desperate effort to save money. Today, grocery, drug, dollar and club stores are enjoying increased shopper visits, at the expense of super-center and mass stores. Share trends reflect these shifts in shopper behavior.

“Channel shifting will continue, and channels will continue to blur,” said John McIndoe, senior vice president of marketing with SymphonyIRI. “The blurring is the result of consumer changes, and also of changing CPG manufacturer and retailer strategies. New products, new marketing programs and new store formats are what keep CPG interesting and also what makes the job of CPG marketers so difficult.”

Across CPG channels, purchase frequency increased 2% during the past year, with grocery, dollar and club channel trends closely mirroring industry average. Across other channels, though, trends vary significantly. For example, frequency within the drug channel accelerated sharply within the last year, increasing by 6.7%. This growth is being driven by a number of factors, including shifting trip mission trends.

Smaller “need-it-now” excursions with an average basket size of less than $40, have become more common as consumers look to minimize large one-time outlays of cash. With a broad assortment of health and wellness solutions and a growing assortment of food and beverage offerings, close-to-home drug stores are a logical destination for shoppers looking to quickly pick up needed items with only minimal gas and time investment. Dollar stores also are benefitting from this trend due to generally convenient locations and broader, expanded assortments. These efforts are clearly paying off, with dollar channel frequency increasing by 2.6% during the past year.

“When thinking about channel migration trends, CPG and retail leaders must consider changes in the channels themselves and how those changes will impact shoppers,” said Susan Viamari, editor of Times & Trends with SymphonyIRI. “For instance, as ‘big box’ retailers open smaller format stores, such as Target opening CityTarget, closer to downtowns, will shoppers continue driving to traditional value formats that tend to be located in more out-of-the-way locations?”

CPG manufacturers and retailers seeking to capture new growth opportunities and minimize risks associated with channel and consumption migration trends should consider the following action items:

  • Identify new growth opportunities and risks through ongoing category and brand channel migration tracking: Manufacturers should closely monitor the evolving competitive set at the channel and retailer level to understand channel share shifts across key categories and brands, including competitor brands, as well as existing and emerging product distribution strategies. Retailers should invest to understand core consumer segments while closely monitoring high-potential targets and their evolving channel, banner and brand selection processes.
  • Align distribution, marketing and merchandising strategies with channel migration patterns: Manufacturers should isolate their most important shoppers and ensure distribution strategies cater to their preferred trip types, channel preferences and store locations. Retailers should cross reference their key shoppers against key consumer segments across key manufacturer partners to find common ground for co-marketing programs.
  • Protect and grow share among top shoppers: Manufacturers should drive satisfaction, trip and basket size with specially-targeted promotional programs that entice and reward top shopper segments. Retailers need to maintain a deep understanding of emerging shopper patterns and competitive threats among key shopper and target segments.
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