The Branded Pantry

Over the last few weeks we have seen some fascinating statistics continuing to chronicle the consumer shift away from traditional supermarkets.

The latest numbers document a half trip/per-household/per-week decline in year over year comparisons.  That is a half-trip per week decline down to only 1.7 trips to the Supermarket for the average household.  This is huge on a percentage basis and if memory serves, it represents the largest acceleration in trip declines on record…by far.

The per cent of households reducing their supermarket visits to once per week built from 29% to 34%.  The importance of households putting off visits to every other week mushroomed from 12% to 20%.

All of this leads to some pretty important questions.  I put down some musings for partial answers.  Any others you might like to advance?  Any questions I ignored?

While people are no doubt adjusting purchasing habits to account for the economy, they are not eating or cleaning less.  Where is the volume going?

1. Some shoppers are buying as much (or more) but doing it in fewer trips.

2. Some shoppers are hitting alternative outlets for both stockups and specific categories.  Many of these include lower cost outlets such as Dollar stores.  Others trips are based on the convenience  of local stores such as Drug and C-Stores.  Perhaps most interesting is a growing move toward online specialty (soap.com) which offers very competitive pricing and does not require fuel for the car, nor time in store or in the checkout line.

Why is the volume moving?

1. Part of the shift represents continued caution and downright increased frugality due to a lack of confidence in any sort of meaningful economic recovery.  All current indicators point toward a long slog in housing and jobs and that means uncertainty which never bodes well for the status quo.  Supermarket trips are status quo.  Finding new ways of saving money and time make a ton of sense to shoppers.  Consumers are shopping deals, private label and shifting toward lower cost outlet options.  Instead of the weekly trip to Costco for fun they are waiting until Costco member coupon week to stock up.

2. Part of this reduction can also be explained by the cost of gas, although given the timing of the data it appears the bulk of the impact from higher fuel prices will be felt in the next set of stats.

3. Rapid changes in buyer dynamics.

a. Single person HH now over 50% of population. Single HH purchases are not as large nor as frequent.

b. Many newer shoppers are NExTgen buyers.  These buyers are more comfortable/prefer to shop online.  They aren’t tied to the traditional values associated with the weekly shopping chores.  These too are primarily single person households.

c. Move toward Urban centers accelerating.  Not as many big supermarkets in urban areas so single stock-up trips become more important.

4. Supermarkets just don’t “fit” as well as they used to.

a. There always seem to be better pricing options.  Going to an Aldi or a Dollar Store has somehow become “make sense shopping.”

b. The cost of driving out of the way to the supercenter or the supermarket, by passing other outlets doesn’t make as much sense.  Planning and making that one trip count means less fuel.

c. If the store in which I normally shop is not the price leader, if the trip is going to cost me expensive fuel and I do not have the faith that I am going to have a predictable result (long lines, empty shelves, favorite brands MIA) than I should start looking for alternatives!

What does it mean to traditional outlets?

There are clearly many implications for the business health of traditional Supermarkets.  Two that I believe do not come up as often as they should, and that carry with them the danger of spiraling particular stores into continuous declines would be:

1. The impact of these fewer, but larger trips on already short staff and short shelf inventory should be more unpredictability for the consumer.  Will I find my product?  Will the person in line in front of me take 30 minutes to check-out?  Will the staff be available to answer my question about why the picture in the coupon does not match the product on the shelf?  The more uncertainty the buyer encounters the more likely they are to search out alternatives with higher predictive values, or at least with lower prices.

2. Supermarkets-supercenters are traditionally viewed as relatively fixed cost businesses.  If traffic diminishes and volume goes with it, then the store has a fairly limited band of actions it can take to reduce operating costs to match.   If on the other hand the trips are reduced but the cart increased to offset, then it becomes much more difficult to forecast labor and inventory to match the spottier shopping patterns.  Mismatches occur and the point above takes over.

How will this all end up?    Will volumes and trips return to the patterns of yesterday?

For answers to these and other questions give us a call at ShelfSnap and Panther Mountain Companies  224 512 4969.