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U.S. Retail Trends

U.S. Retail Trends. Todd Hale SVP, Consumer & Shopper Insights May 3, 2013. Table of contents. Economic Update (3) Economic Divide (13 ) Gas Price Update (33) Consumer Confidence (42) Retailing Trends (49) Monthly gov’t sales (50) Same-store-sales (51)

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U.S. Retail Trends

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  1. U.S. Retail Trends Todd Hale SVP, Consumer & Shopper Insights May 3, 2013

  2. Table of contents • Economic Update (3) • Economic Divide(13) • Gas Price Update (33) • Consumer Confidence (42) • Retailing Trends (49) • Monthly gov’t sales (50) • Same-store-sales (51) • Retail Channel Trends (62) • Retail Channel Shopping Behaviors (140) • Retail Channel Demographics (151) • Channel Blurring (165) • Retail Trends Summary (172)

  3. Economic Update

  4. CONFIDENCE DRIVEN BY MANY FACTORS Which remain volatile, uncertain, but improving HOUSING EQUITY MARKETS FUEL COSTS INFLATION GOVERNMENT LABOR MARKETS

  5. Modest Q1 & rest of year GDP growth U.S. Real GDP Percent Change from Preceding Period (seasonally adjusted at annual rates) 2008 2009 2010 2011 2012 2013 Sources: U.S. Department of Commerce, Bureau of Economic Analysis, April 26, 2013; *USA TODAY economic survey (estimate) of 50 top economists, Aug. 3-8, 2012

  6. “Payroll tax whacks spending” Source: The Wall Street Journal

  7. 165K New Jobs & Rate Drops to 7.5% April 2013 – Unemployed for longer than 27 weeks: 37.4% U.S. Monthly Job Losses/Gains: Source: Seasonally Adjusted U.S. Total Non Farm Employment, Bureau of Labor Statistics - U.S. Department of Labor

  8. Underutilized paints tougher picture Source: Seasonally Adjusted U.S. Total Non Farm Employment, Bureau of Labor Statistics - U.S. Department of Labor

  9. Inequities will impact products differently April 2013 Unemployment Rates – Seasonally Adjusted Race/Ethnicity Asian 5.1% (not seasonally adjusted) White 6.7% Hispanic (any race) 9.0% Afr-American 13.2% Age Group 20-24 13.1% 25-34 7.4% 35-44 5.8% 45-54 5.9% 55+ 5.5% Education Less than high school diploma 11.6% High school grad; no college 7.4% Some college, or assoc degree 6.4% Bachelor degree and higher 3.9% Gender (adults 20 +) Women 6.7% Men 7.1% Source: Seasonally Adjusted U.S. Total Non Farm Employment, Bureau of Labor Statistics - U.S. Department of Labor

  10. Misery index improving Misery Index = Unemployment Rate + Inflation Source: U.S. Bureau of Labor Statistics; CPI non-seasonally adjusted, unempl. rate seasonally adjusted

  11. Greater misery for young & less educated Misery Index = Unemployment Rate + Inflation Source: U.S. Bureau of Labor Statistics; CPI non-seasonally adjusted, unempl. rate seasonally adjusted

  12. “Housing Future: Renting and Downsizing” The Associated Press reported on Feb. 11, 2012— Recent declines in housing wealth may be reducing consumer spending between $200 billion and $375 billion per year. Ben Bernanke The Wall Street Journal reported on May 15, 2012— Be it ever so humble, there’s no place like a rented apartment. Less space will change spending patterns… Food and nondurable retailers may find shoppers making more visits but buying less each time because of fewer cupboards in their homes.* *The Demand Institute is jointly operated by the Conference Board & Nielsen Holdings N.V. - Source: Associated Press, The Wall Street Journal & Bloomberg News (photo)

  13. Economic Divide

  14. Value stays as income goes Decline in median household income in 9 of last 12 years Median household income in 2011 inflation adjusted dollars Source: U.S. Census Bureau

  15. SNAP gains despite declining unemployment • SNAP: Monthly Participation (Persons) • Jan 2009: 31,983,716 • Jan 2013: 47,772,108 +49.4% • Unemployed Persons (seasonally adjusted) • Jan 2009: 12,079,000 • Jan 2013: 12,332,000 +2.1% SNAP = Supplemental Nutrition Assistance Program Source: United States Department of Agriculture Food and Nutrition Service; Bureau of Labor Statistics, Current Population Survey

  16. SNAP gains even with growing employment • SNAP: Monthly Participation (Persons) • Jan 2009: 31,983,716 • Jan 2013: 47,772,108 +49.4% • Employed Persons (non-farm, seas. adjusted) • Jan 2009: 133,631,000 • Jan 2013: 134,839,000 +0.9% SNAP = Supplemental Nutrition Assistance Program Source: United States Department of Agriculture Food and Nutrition Service; Bureau of Labor Statistics, Current Population Survey

  17. “1 in 5 Kids in U.S. Living in Poverty” • About 2.7 million more children lived with an unemployed parent during a typical month [during 2012] compared with 2007, a 71 percent increase. • Some 2.8 million children lived with a parent who was out of work for six months or longer. • About 9 percent of all children live with unemployed parents, compared with 5 percent before the recession. • More than 21.6 million children receive subsidies, an increase of 8.8 million from  2007. National JournalDec. 5, 2012 Source: National Journal & AP Photo (Mel Evans)

  18. Greater spending power as income rises Source: Nielsen Homescan, 52 w/e 12/29/2012 - excludes gas-only or Rx-only trips

  19. Because of greater spend more per trip Source: Nielsen Homescan, 52 w/e 12/29/2012 - excludes gas-only or Rx-only trips

  20. Retailing at the extremes Channel Preference: % Household Penetration Income < $25K Income $200K+ Source: Nielsen Homescan, 52 w/e 12/29/2012 - excludes gas-only or Rx-only trips

  21. Diverse Banner attraction Banner Preference: % Household Penetration Income < $25K Income $200K+ Source: Nielsen Homescan, 52 w/e 12/29/2012 - excludes gas-only or Rx-only trips

  22. Innovating for lower price point Poverty is returning to Europe… Unilever has already started to change the way it sells some of its products. In Spain, the company sells Surf detergent in packages for as few as five washes, while in Greece, it now offers mashed potatoes and mayonnaise in small packages, and has created a low-cost brand for basic goods such as tea and olive oil. The Telegraph (UK)Aug. 27, 2012 Source: Heinz Q2-FY2012 Earnings Webcast (11/18/2011); P&G; The Telegraph (UK)

  23. Price wars The average price gap has been 17% against food competitors and 20% against health and wellness competitors, …including a gap of…15% against Publix. Supermarket NewsOct. 12, 2012 Source: Supermarket News, The Birmingham News, Christie Dedman/News Staff

  24. Food Lion challenging Walmart Source: http://www.foodlion.com/Savings/Promotions/FoodlionVsWalmart

  25. Price freezes Source: Wegmans, Weis Markets, Kroger, Giant Eagle, Progressive Grocer

  26. Price matching Source: Target

  27. breaking it down to cost per serving Cost perserving Source: Hy-Vee

  28. Expanding outside their core Bluebird addresses the need for an affordable, transparent way to manage everyday finances, with premium features, no minimum balance, monthly, or overdraft fees Walmart Source: Walmart

  29. Restaurants fight back with discounts + Source: Wendy’s, Olive Garden, Red Lobster

  30. BK debuts upscale spring MENU Source: Burger King

  31. Winning with solutions – not deals retailers achieved a 19.2% average incremental increase in units sold across the displays and 20.5% in dollar sales. Dairy products scored even higher…The gains were recorded without promotional pricing or extra marketing Supermarket NewsJun. 2, 2012 Source: Supermarket News; Innovation Center for U.S. Dairy’s Dairy Meal Solutions: Merchandising Works study (April 2012)

  32. Value a balance between price & benefits Value Consumer ≠ Price Value Consumer = Benefits/Price Mainstream CoffeePremium Coffee Average price 90% higher Dollar sales -3% Dollar sales +6% Pound sales -4% Pound sales +4% Soluble/Instant Coffee Coffee PodsAverage price 130% higher Average price 462% higher Dollar sales +2% Dollar sales +103% Pound sales -2% Pound sales +101% Convenience Enhanced Convenience Source: Nielsen Scantrack, Total U.S. - All Outlets Combined, 52 weeks ending 12/29/12 (vs. year ago), UPC-coded items

  33. Gas Price Update

  34. Gas prices now on downward path Source: U.S. Energy Information Administration - Monthly U.S. Regular All Formulations Retail Gas Prices (2011, 2012 & 2013) - prices include all taxes

  35. Rising prices stall & below year ago • Typical Consumer Reactions: • Trip compression • Eating out less • Value buying • Increased coupon usage Source: Nielsen Gas Impact Homescan Survey; U.S. Energy Information Administration - Weekly U.S. Regular All Formulations Retail Gas Prices (2012 & 2013) - prices include all taxes

  36. regional prices differences, but all down Price differences since last year(week ending 4/30/2012 versusweek ending 4/29/2013) • Total US: -31¢ • New England: -41¢ • Gulf Coast: -39¢ • Central Atlantic: -38¢ • Lower Atlantic: -36¢ • West Coast: -32¢ • Rocky Mountains: -30¢ • Midwest: -20¢ Source: U.S. Energy Information Administration - Weekly U.S. Regular All Formulations Retail Gas Prices (2012 & 2013) - prices include all taxes

  37. Winning with gas rewards Are you …buying more gas at locations because of incentives tied to spending levels at GROCERY store where you shop? …up to $2.20/gallon! One-third of households shopping grocery to save on gas Note: Stop & Shop gas rewards points are valid for 30 daysSource: Nielsen Homescan Surveys; Stop & Shop

  38. Other channels not gaining ground Other than GROCERY, are you …buying more gas at locations because of incentives tied to spending levels at that store where you shop? Source: Nielsen Homescan Survey; Rutter’s, Turkey Hill, Speedway

  39. Gas rewards key part of loyalty programs Source: Company websites & LogoBase

  40. BP launching new loyalty program BP Driver Rewards BP is the first major oil company to launch a “non-payment” loyalty program that rewards fuel purchases with fuel cents-per-gallon rewards. Instead of requiring consumers to purchase additional convenience store items, BP Driver Rewards gives fuel purchasers rewards for the quality fuel that they regularly purchase. NACS OnlineFeb. 18, 2013 Source: NACS Online

  41. Vehicle charging stations Source: MyFord Mobile, www.ford.com/technology/electric/evready, www.theevproject.com & company websites

  42. Consumer Confidence

  43. The ups & downs of consumer confidence  Consumer Confidence Index – January 2002 through April 2013 90 68 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: The Conference Board

  44. Improving but still not at healthy level Nielsen U.S. Consumer Confidence Index +7pts avg. 90 avg. 83 Source: Nielsen Global Consumer Confidence & Opinion Survey through 1Q’13

  45. Saving & paying off debt still priorities Once you have covered your essential living expenses, what do you do with your spare cash? I spend it on… 28% reporting no spare cash No Change 1Q13 vs. 4Q12 Despite increase in cash strapped consumers, claimed discretionary spending on rise Source: Nielsen Global Consumer Confidence & Opinion Survey through 1Q’13

  46. Economy #1 concern; fuel concerns rise What are your biggest concerns over the next six months… Source: Nielsen Global Consumer Confidence & Opinion Survey through 1Q’13 (versus previous quarter)

  47. CONSUMER OUTLOOK REMAINS STUBBORNLY WEAK Percent who think the U.S. will be out of a recession in the next 12 months MostOptimistic MostPessimistic 25% 10% Source: Nielsen Global Consumer Confidence & Opinion Survey through 1Q’13

  48. Pragmatic behavior continues, but less intense Source: Nielsen Global Consumer Confidence & Opinion Survey through 1Q’13

  49. RETAILING TRENDS Competition heats up!

  50. March retail sales fall Monthly % change in Retail Trade & Food Services, ex Auto – seasonally adjusted Recession Recovery Source: U.S. Census Bureau (44Y72: Retail Trade & Food Service, ex Auto)

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