Shifting Shopper Behavior

Rising from the ashes of the recession, shoppers are hitting the stores with their smartphones and a new attitude. Grocers have to get on board if they want to stay in the game.

A shopper makes her way through the center store with a smartphone in hand and a cart full of her family’s favorite products. Then, unexpectedly, an alert on her phone catches her eye and she reaches for an item she has never purchased. It is on sale—or at least it is for her. Unbeknownst to her, the next customer will be presented with a different price.

Sound futuristic? Not at Safeway stores in Oregon and Washington. Called Just for U, the Pleasanton, Calif.-based chain’s new online and mobile savings tool that offers customers savings on the products they purchase most frequently, in addition to new products that might be of interest to them.

Then there is Quincy, Mass.-based Stop & Shop Supermarket Co.’s SCAN IT! Mobile app. As the shopper scans products, the app determines where in the store they are located and presents offers on products in the department.

Personalized merchandising strategies are gaining momentum across retail, say industry observers, and there are more changes coming to the retail landscape.

“We are seeing that the Just for U program has broad appeal across our shopper base, from younger, single shoppers who appreciate the convenience the program offers to empty nesters who really appreciate how the offers are personalized to their needs,” says Mike Minasi, president of marketing for Safeway.

Numerous studies are showing a shift in consumer behavior. Triggers such as the seemingly never-ending recession and the quick growth of digital technology are driving traditional consumers to rethink their priorities and expectations of the retail market. Behind the wheel of this evolution is the Millennial demographic.

“Segments of shoppers are adapting their shopping patterns to maximize their own personal situation,” says Claire Quinn, group director of national shopper insights for Coca-Cola Refreshments, based in Atlanta. “In the uncertain world we inhabit, consumers find reassurance in control and self-reliance. The ‘empowered consumer’ has been a growing trend for the last decade. This translates to empowered shoppers increasingly controlling their spending through knowledge and preparation, leveraging a range of tools.”

Defining value
Ultimately what is evolving is consumers’ definition of “value.” What once described “lower price,” the term is now being used to signify the quality consumers expect to receive for their money. Charles Vila, vice president of consumer and customer insights for Camden, N.J.-based Campbell Soup Co., calls it “personal return on investment.”

“Customers are making deliberate decisions about their choices and how they spend their discretionary income,” says Vila. “In the past they would approach a store with an ‘and’ mindset—‘I will take this and take that’—but it is increasingly becoming ‘I will take this or take that.’ The challenge for anyone trying to get consumers to open up their wallet to spend money on something is to prove that there is a high return on investment for that product or service. And it doesn’t matter the price or size of the product; it’s the same for a large-screen TV as it is for a can of soup.”

Booz and Company, a global management consulting firm, and the Food Marketing Institute (FMI), in collaboration with other data providers, recently completed an in-depth study of U.S. shopper trends that are reshaping the food retail industry. In the report, U.S. Grocery Shopper Trends 2012, “value-seeking” came out on top.

According to the report, the recession caused about 20% to 30% more shoppers to adopt “value-seeking” behaviors, which includes shopping for the best grocery deals, clipping coupons, choosing private label products, cooking at home more than eating out, consuming leftovers and only purchasing what they consume regularly.

Add in consumers already exhibiting theses characteristics and Booz and Company estimates 75% to 90% of the population is currently exhibiting frugal shopping behaviors. These value-seeking behaviors are being called “the new normal.”

David Fikes, senior director of consumer affairs at Arlington, Va.-based FMI, who worked with Booz and Company on the study, says the slow recovery from the recession is to blame for this permanence. “I think there is a lack of consumer confidence in the economic recovery and therefore shopper are really hanging on to the use of coupons, seeking out sales, comparison shopping online, etc.”

What stands out in the report is that approximately two-thirds of these newly frugal shoppers claim they will not revert to their previous behaviors when the economy fully rebounds.

While Nick Hodson, a partner in the San Francisco office of Booz and Company, questions consumers’ dedication to their newly developed habits, he says the results were consistent when asked in a number of different ways. “We’re confident that there really is a change; the industry can no longer rely on a percentage of consumers being blissfully unaware of prices. Very few shoppers going forward will not be value aware—and this is going to impact retailers,” he says.

“Quality receive per dollar spent” is a vague concept on which to base merchandising strategies. The quality of a product incorporates its nutritional characteristics, its brand recognition, its convenience factor and a host of other attributes. Therefore, industry observers are noting the necessity of marketing to specific population segments, sub-segments and even individuals.

Quinn says the answer lies in segmentation. “Some shopper segments are highly engaged in improving their knowledge about healthy eating practices and rigorously monitoring their behavior. We see trends such as shoppers wanting to understand the history and origin of their food and a rise in vegetarian dishes and diets,” she says.

“Yet there are other segments whose priorities lean more towards convenience, portability, sustainability, taste and price, who place health-related issues lower on their priority list,” she adds.

Millennials lead the way
No one demographic group is driving the personalization trend more than Millennials, experts note. Generally defined as late teens/early 20- to early 30-year-olds, Millennials shopping habits are very different from those of traditional shoppers; their definition of value has developed to include any combination of attributes.

Low-paying, entry-level job positions left this category of shopper vulnerable to the deep recession. According to the SymphonyIRI Shopper Sentiment Index, they were impacted the hardest; the Bureau of Statistics reported the 2011 unemployment rate for the segment at 12%, compared to 9% for the general U.S. population.

Facing uncertain times during their formative adult years has left Millennials more heavily influenced by money-saving opportunities, compared to the population as a whole. For example, as reported in Millennial Shoppers: Tapping into the Next Growth Segment by Chicago-based SymphonyIRI Group, 38% of Millennials are influenced by signs or displays, compared to 28% of the population, and more than half of Millennials are influenced by shopper loyalty discounts, versus 40% of the general population.

The result of adopting these values as they shop for their household for the first time could be a long-lasting habit. Hodson notes that this age group could be permanently impacted by these recession-induced habits; similar to the pre-war generation of the 1930s that never developed big spending habits.

Millennials discount-focused behavior is not unique to the generation, but their media consumption habits are very different from traditional shoppers. This shopper segment has a different mentality—an “always on” mentality—that drives their focus, says Brian Cohen, director of digital shopper marketing, CatapultRPM, a Hyper Marketing company, based in Westport, Conn. “Finding discounts goes beyond the Sunday circular. When Millennials are in shopping mode they rely on a bunch of tools, whether it’s a mobile device, in-store kiosk, a website.”

It is not just Millennials, observers say. They may be driving the trend but other generations are following in their footsteps, notes Cohen, adding that 30- to 50-year-olds have more disposable income to splurge on tablets and smartphones.

“What the grocery industry should be concerned about is the pace being set by value-seeking Millennials; it may become the new norm,” says Thom Blischok, Booz and Company’s chief retail strategist and senior executive advisor from the San Francisco office. “They are using technology to get more without spending more. They are using technology to change the game. Behavioral shift is a long tail activity but there may be the rudiments of fundamental transformation in how consumers shop for groceries going forward, right now.”

FMI is encouraging its members to “to become more specific about how they address consumers’ varying needs and how different generations use technology.”

“We tell them to think in terms of groups—Millennials, Gen X, Baby Boomers—and look at how they use technology differently, how they shop differently, how they gather information differently. We want our members to become more diverse and specific in terms of looking at how they adjust to different generational needs,” says FMI’s Fikes.

Many supermarkets are surging ahead with in-store technology, such as handheld scanners, Wi-Fi and mobile shopping apps, QR codes and personalized couponing. Others have the pre-shopping stage covered with a website that advertises its weekly circular and loyalty program.

It is the latter that has the most influence for retailers just jumping on board the technology train, says Cohen. “Any tool that is a translation of a traditional mechanism has the highest adoption. Online couponing, self-checkout options and online circulars are the big three right now.”

Shoppers plan online
According to Acosta Sales & Marketing’s The Why? Behind the Buy spring 2012 bi-annual report, pre-planning is still the primary way shoppers use digital when grocery shopping—36% of shoppers log on onto home computers. Of those planning their trip, the grocery store website is the preferred place to find information.

The report also stated that 89% of shoppers have cell phones—33% have smartphones—and shoppers are responding to promotions on the spot, demonstrating mobile technology’s growing appeal.

“Millennials have a strong appetite for new technologies and their quick adoption of smartphones and tablets make those devices excellent platforms for us to offer new services on,” says Safeway’s Minasi. “Devices like smartphones, however, are now owned by a wide array of shoppers segments such as families, older shoppers and Hispanic shoppers. Millennials may be leading the way with new technologies but programs like Safeway’s Just for U have a broad appeal because they address the needs of so many shoppers and are easy to use.”

Cohen reaffirms Safeway’s approach: “Retailers needs more than just a mobile strategy; they need an integrated strategy with mobile, tablet, digital and general layers to it. It is about personalized marketing. We are very close to a point in time when we can market so close to our individual interests that old world metrics, such as impressions, are going to be obsolete,” he says.

Mobile technology provides a thread through different forms of digital promotions—email, web and apps—and is having a strong influence on retail space outside of grocery. Using mobile phone apps such as Price Check by Amazon, consumers are shopping in-store only to scan the UPC and have the item delivered to their house for free from an online outlet.
E-commerce is a way of life for Millennials, so observers say it is no surprise that the industry is seeing an online encroachment into the traditional arena. As reported in U.S. Grocery Shopper Trends 2012, more than 50% purchase grocery categories online at least occasionally.

Broken out, however, it is noted that the majority of grocery categories purchased online are nonfood items—personal and beauty care (29% of shoppers who make online purchases in this category), health care (29%), home essentials (12%) and pet care (9%). Only 12% said they bought dry groceries and beverages online and only 4% bought fresh foods and produce.

Experts expect these numbers to increase, especially as e-commerce companies such as Amazon toy with same-day delivery options.

Fighting back
How can retailers combat e-commerce?

Some retailers are beginning to re-focus their strategy to combat e-commerce by playing up the advantages to shopping in-store, such as a hand-on shopping experience and instant access to product. While others are examining a multi-channel platform, says Fikes, where they would act as an outlet for online sales, or enter into a partnership to offer online sales, particularly with center store items.

Whatever strategy a retailer embarks on, CatapultRPM’s Cohen says think about the customer first: “If you are leading with anything else—bottom line, product sales, deals, etc.—you have already lost. “Deals do not drive loyalty, they drive tomorrow’s sales—retailers need knowledge, understanding and personalization.”

For those set against online shopping it is in exchange for customer service. This is the area to play up in-store, say experts. There is a trend towards supporting local businesses and the community—a move back to the mom and pop mentality of knowing the customers, anticipating their needs and addressing them.

This proves harder for the Millennial demographic who has build their mindset in a digital world. It is going to take a unique and fun experience with the right product mix, says Coca-Cola’s Quinn.

“Millennials are drawn towards retailers that offer unique, experiential environments, and they really value brands that understand ‘who they are.’ Younger shoppers favor brands that are more about fun, excitement and style, while 20-somethings move towards brands that signify reliability, good design, dependability and ease-of-use,” she says.

The manufacturer targets a wide range of consumers with a product mix that includes hundreds of beverage options—sparkling, waters, juices, sports drinks and teas—in numerous portion sizes, such as its 7.5-ounce “mini” cans of select brands and multiple family-size packages.

“We provide these options because we believe that there is a place in our customers’ lives for all of our brands,” says Quinn. “Millennials are quite frugal and savvy shoppers but they will pay more for brands that they believe are higher in quality, performance, taste; it is important for manufacturers to engage this generation on their terms if they want to stay relevant.”

Along with maintaining a diverse product profile, manufacturers catering to younger demographics are redesigning their packaging. Retailers are seeing shelf-stable cartons and pouches replace traditional cans, jars and bottles to appease this demographic’s attitude towards health and the environment.

Soups packaged in cartons, for example, have triggered a reverse in the 10-year decline of soup purchases by consumer under age 25, according to SymphonyIRI Group Market Advantage data. “Consumers perceive products in cartons to be fresher, more natural and better tasting,” according to the research.

This was the intention behind Campbell Soup Co.’s Go! Soup. The line of pouch-packaged soups was designed with Millennials in mind noting its graphics, microwaveability and portability in its marketing.

The shopping experience has to equal the unique products. Blischok suggests retailers get back to basics and ask themselves the question: what does it take to be profitable in the grocery industry going forward?

“Retailers have tested and experimented with some of the same things—whether it be store formats, bigger stores, smaller stores, restructuring a store. The reality is that fundamental profit structure of the industry hasn’t changed that substantially,” he says.

“We think it ranges from how you increase the productivity of your shelves, how you serve your shoppers, how you attract new shoppers, how you manage your costs overall, how you cut costs and reinvest it in areas that you can really differentiate and, of course, how technology can enhance the store itself. Overall, how you can change the shopping experience to show consumers its tuned to them,” he adds.

“I think we could say we are on the cusp of rethinking how the grocery store should compete going forward.”

M’m! M’m! Sales
Cambell’s focus on consumers has led them to target a younger generation with bold new flavors and packaging for the center store.

How are officials at Campbell Soup Co. addressing the new norm in consumer shopping behavior? They are getting to know the consumer.

Putting customers first is central to what the company does; it is about understanding shoppers’ needs throughout all aspects of their lives, both in and out of the store, says Charles Vila, vice president of consumer and customer insights for the Camden, N.J.-based company.

The company’s research into shoppers’ habits reveals a shift in how consumers perceive value. As the economy continues to place pressure on discretionary budgets, shoppers are forced to make more decisions about what products offer enough value to be worth their hard-earned money.

“Consumers want a personal return on investment each time they make a purchase,” says Vila. “The excesses of the past that we were all part of have been re-thought and re-prioritized. This will continue to play out increasingly and become incumbent on us in the CPG world—and even more broadly than that.”

Campbell’s dedication to consumer research is fueled by its desire to ‘delight and engage the consumers that it has today and attract new consumers to the brands that would open up new occasions for Campbell’s products in their lives,’ notes Vila. One customer segment the company has focused on over the past year is the Millennial demographic. Never before considered a target for the company, this shopper base is being viewed as a major driving force in product development, according to industry observers.

“There are 80 million of them and they are wired differently from the generations ahead of them,” says Vila. “They are tech-savvy; they are into food; they are fearless in the kitchen; they eat sushi, Thai and Mexican food as a matter of everyday dining; and they have a restless spirit and an adventurous appetite.”

Campbell’s developed its newest product lines to play up to these characteristics. Described as “designed for Millennials by Millenials,” the line of Go Soups come in adventurous flavors, such as Creamy Red Pepper with Smoked Gouda, Golden Lentil with Madras Curry, Moroccan Style Chicken with Chickpeas, Coconut Curry with Chicken & Shiitake Mushrooms, Spicy Chorizo & Pulled Chicken with Black Beans and Chicken & Quinoa with Poblano Chilies.

What makes it stand out even more is the unique 14-ounce pouch-style package featuring contemporary graphics that was designed for convenience and on-the-go lifestyles.

The company invested time into understanding how to design a package that would communicate and connect with its target shoppers. Vila says that some of the early designs had the face of a Millennial shopper looking straight out from the package, but it spooked consumers. Once turning the face askew it became more reflective of the shoppers and their friends, he further explains of the research that went into the packaging.

The pouch is also a feature of the new line of Skillet Sauces. While Go Soups are aimed at the younger cohort of Millennials, the Skillet Sauces were created with those in mind who are coupled, live with roommates or just like to be able to cook restaurant-quality flavors in minutes, says Vila.

The flavors include Marsala with Mushrooms and Garlic, Scampi with White Wine and Garlic, Fire Roasted Tomato with Red Bell Peppers and Chiles, Creamy Chipotle with Roasted Corn and Black Beans, Toasted Sesame with Garlic and Ginger and Thai Green Curry with Garlic and Ginger.

The company believes these new lines, among others, have the potential to re-energize not just the categories but draw new customers to the center store for retailers.

Marketing to Millennials is the same as any other demographic, says Vila, “you need to understand who they are and how they get information and then deliver it to them in the most relevant fashion.”

He adds: “They have this thing called FOMO—Fear Of Missing Out; they are constantly connected to their friends and information sources. This is a huge opportunity if you use it correctly. A digital and technological orientation is something you will see more of from Campbell as we strive to connect consumers to our products.”

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