The recession is changing how we shop
With consumers resorting to ‘little and often’ shopping strategies in a bid to stretch their household budgets ever further, Dan White examines how the recession has changed shopping patterns
Print11 September 2013
The recession is changing the way we shop with cash-strapped consumers increasingly dividing their custom among different retailers, giving an ever-rising proportion of their total grocery budget to the discounters and opting more and more for private-label over branded products.
Who would have thought it even a decade ago? The most recent figures from market research firm Kantar Worldpanel reveal that the combined market share of the German discounters, Aldi and Lidl, is now up to 15.1%. Even as recently as the mid-noughties such a situation would have been simply inconceivable.
Rise of private-label
The established retailers have been forced to respond in kind, either by introducing their own private-label ranges or upgrading their existing offer. As a result, private-label now accounts for 37% of the Irish grocery market by value. And there’s almost certainly more to come; private-label accounts for 50% of the UK grocery market by value and 56% by volume.
Even when shoppers do opt for the branded rather than the private-label product, they are increasingly likely to require the incentive of either a promotion or special offer. In the UK it has been estimated that up to 40% of all grocery sales are now on some sort of deal.
Farewell to Superquinn
Indeed the rise and rise of private-label was one of the main reasons for Musgrave’s recent decision to kill off its Superquinn retail brand. With a market share of just 5.4%, Superquinn lacked the economies of scale necessary to justify a major investment in a new private-label range. Instead Musgrave opted to subsume Superquinn into its flagship SuperValu brand, which recently launched a new private-label range of its own.
With a market share in excess of 25%, the merged SuperValu/Superquinn possesses the heft that a stand-alone Superquinn did not.
While the rapid rise of the discounters and private-label will be readily apparent to even the most casual observers, the recession has wrought deeper, more subtle changes in the way in which we do our shopping.
Fewer weekly supermarket trips
Back in the good old days, when it seemed as if the Celtic Tiger would roar forever, most affluent Irish families got into the car and headed off to the nearest outlet of one of the major supermarket chains and filled up the boot with enough groceries to last them for at least the following week.
Not anymore. Over the past five years more than quarter-of-a-million workers have lost their jobs, while even those who have hung on to their jobs have seen their disposable incomes ravaged by rising taxes and wage cuts. Consumer confidence has been further battered by the fact that several hundred thousand homeowners are stuck in negative equity, where the amount outstanding on their mortgage exceeds the value of their home.
Suddenly that weekly all-in trip to the supermarket makes a lot less sense.
Shopping little and often
Recent research published by Bord Bia shows that when it comes to their shopping habits, Irish consumers have become far more promiscuous in recent years. Instead of the single weekly shop of yore, we are now far more likely to divide our custom between different retailers.
The average Irish household made no fewer than 56.3 shopping trips in the 12 weeks to mid-March 2013, according to the Bord Bia research; that’s almost five trips per week. The average spend on each of these trips was €21.80. Little and often now seems to be the preferred method of grocery shopping for most Irish consumers.
Hypermarkets on the wane
This shift to little and often threatens to render huge out-of-town hypermarkets obsolete. While the cost and inconvenience of a trip to a hypermarket might have made sense to shoppers if they were doing so only once a week or a fortnight, dropping a couple of hundred quid while they were at it, it makes no sense at all if they are shopping every second day or more often and spending only 20 quid a time.
Already Tesco has announced that it is scaling back its plans for further out-of-town expansion in the UK. It took a £804m hit in its last set of annual results when it wrote down the value of the sites on which it hoped to build new hypermarkets. Most of these planned new stores have now been put on ice.
Growing online sales
While it is still early days, the internet will also transform the way in which we shop, including for groceries. Although online represents just 4% of the UK grocery market and an even lower proportion of the Irish market, it is clearly going to grow rapidly in the years ahead.
A sign of the times is the fact that 94% of all Irish consumers made an online purchase in 2012. While it was mainly items such as PCs that were purchased online, it seems reasonable to assume that once customers have dipped their toe in online shopping, they will return to purchase other items, including groceries.
Even where consumers continue to do their shopping at conventional bricks-and-mortar, their purchasing decisions will be increasingly influenced by social media sites such as Twitter.
Creating consumer confidence
However, if consumers are to be persuaded to part with their cash, either online or off-line, then it is essential that there is a recovery in confidence. That is why the latest CSO employment statistics, which show that a net 33,800 new jobs were created in the 12 months to the end of June, are so important.
Nothing destroys consumer confidence as thoroughly as rising unemployment levels. It isn’t just those who have lost their jobs, 269,000 since 2007, who cut back on their spending. Almost everyone else – there are still 1.87 million people with jobs in this economy – terrified of losing their jobs and subsequently cuts back too.
Will a gradual recovery in the labour market, by easing the fears of those still in employment, lead to the recovery in consumer confidence the retail sector so desperately needs? It would certainly help but first the banks have to be persuaded/cajoled/bullied into dealing realistically with the mortgage arrears crisis. Until that happens consumer confidence and retail sales will remain stuck in the doldrums.
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