Consumers to Stay Thrifty in 2010

While consumers around the world are more confident about the year ahead, Americans still seem relatively unconvinced there will be drastic improvement. And they have good reason to be leery.The “jobless” recovery -- like government bailouts -- hasn’t yet touched consumers. Banks remain skittish about extending credit. Home foreclosures will likely hit hard in the first quarter of 2010 as banks work through an incredible backlog. And smaller community banks with exposure to commercial loans will be acquired should they not have the reserves to cover the losses. While economic indicators point to a technical recovery, a fair number of looming issues have yet to be addressed.With these mixed messages, what will the American consumer do? Nielsen research reveals that consumers’ fundamental spending adjustments are likely to last in the next year. Either by choice or necessity, their new-found thriftiness will continue. Almost one-third of consumers -- 30 percent -- said they would use credit less, even when conditions improve, with 19 percent saying that they intend to save more money.Discretionary spending cutbacks continue to change the way consumers shop. Consumers now use coupons with an enthusiasm not seen in many years -- for the first three quarters of 2009, Inmar reported that manufacturer coupon redemptions were up 26 percent.Food departments outperformed non-food, health and beauty and general merchandise departments as Americans returned to cooking and eating at home, boosting grocery channel shopping trips in the process.Store brands grew, becoming acceptable alternatives -- or even preferred brands -- for many.Meanwhile, consumers “traded down” across categories, preferring chicken, turkey and pork to beef and seafood.While value channels such as supercenters, shopping clubs, dollar stores and online retailers drove some spending, discretionary retail channels (home improvement, office supply and pet stores) saw declines.Top Five Consumer Goods Spending Trends in 2010:1. Restraint remains the new normal. Americans’ confidence has been slower to rebound compared to other parts of the world. The need to save money, unemployment and other economic issues continue to be top of mind, suggesting that any return to past behavior may take some time -- if at all.2. Value is a top priority.With no signs of readiness to open wallets, a focus on low prices at the expense of all other variables threatens margins. Value messaging must also include some point of differentiation beyond pricing. Manufacturers and retailers that “drive the recession wave” and take an active role in innovation and ad spending are likely to be the big winners.3. Store brand growth continues. Even with year-end 2009 softness in store brand dollar share growth as retailers cut prices across the store to be more competitive, unit share growth continues and retailer focus has never been stronger.4. Grocery consolidation intensifies.Local and regional players, unable to drive profits in the soft economy, will become acquisition targets and some larger national and regional grocers will divest unprofitable formats to strengthen investments behind their winning formats and banners.5. Assortment wars escalate. Retailer efforts to simplify the consumer shopping experience by eliminating aisle and shelf clutter will cause market share land grabs for small and medium-size brands in pursuit of elusive revenue growth. Retailers may lose sales as they shift away from in-store merchandising that drove impulse buying and built shopper baskets. Look for brands caught in the trap of greater store brand focus and assortment optimization to forge alliances with key retailers, enter or step-up efforts as store brand suppliers, and/or explore direct-to-consumer sales.See also: "Consumers Still Cautious, but Poised to Spend"Nielsen Business Media

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Consumers to Stay Thrifty in 2010

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