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The Return Of The Brand!
It's a great time to be a brand -- retail banner or packaged
good. As consumer sentiment is on the upswing (at least it's starting
to look that way) and the War winds down, the influence mix on
product purchasing is shifting. And shoppers are heading 'back to the
brand.'
Sure, we could argue that the amount of advertising and promotion
that is spent against a brand is all that matters; but the truth is
that each shoppers emotions have a role in deciding each purchase.
The trust and credibility of a brand is what will matter at point
of sale as a shopper tries to decide which product to buy. In the era
of Martha Stewart being forced to step down from the company she
created and which bears her name, it's a reminder that each retailer
and product manager has the 24/7 responsibility of reinforcing and
protecting their brand.
In this month's issue of F3 Michael Sansolo reinforces the role
and responsibility of retailers in dealing with food safety issues:
in particular Mad Cow Disease as this situation now is linked to a
cattle ranch in Montana. Who is buying their groceries where (and
why) is explored in this month's Channel Blurring column and the
facts behind the upscale Whole Foods consumer is broken down under
Niche Retailing.
James Russo's Economic Snapshot suggests that now is the time to
think positively as he tracks and explains the leading indicators.
The future of mail order catalogs was once thought of as bleak, as
Internet shopping evolved. Today mail order and e-commerce seem to be
the perfect soul mates and is poised for growth; the results of our
latest consumer panel poll show where the growth is headed.
Consumer Pre*View, the predictor of consumer trends, reports that
"dining out is coming back" and the most effective media to
communicate to consumers about health and fitness issues. Channel
Watch continues to track where consumers are shopping and the retail
channels to watch closely are Dollar Stores and Convenience/Gas; both
reporting higher customer visits.
It's the time to think about retail holiday promotions, but many
retailers seem to be waiting to see just how much the economy will
rebound; and then will determine the focus for their programs. In the
meantime, brands are reporting to us more co-op promotions for this
fall as companies continue to feel the squeeze on their advertising
and promotional budgets. Let's utilize what we know about shoppers to
develop the programs that will be a win/win, and remember that in
2003 its about value, quality, service and the relationship.
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June 9, 2003
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The Importance Of Knowledge
How many consumers really understand anything about "Mad Cow"
Disease? How many have a real sense of how it is transmitted, how it
occurs and how it could impact them? More importantly, how many of
them would actually answer any of those questions correctly?
Sadly, the last question is probably the most problematic for the
food industry. News of a problem cow in Canada grabbed headlines in
recent weeks and caused a ripple of stories throughout the media. No
doubt, it also caused a ripple of concerns among consumers. Here's
hoping it also caused a new level of education for store employees
and consumers so that shoppers can better know what should actually
concern them.
A poll on SupermarketGuru.com provided an interesting
glimpse of shoppers' minds. While most consumers are concerned about
Mad Cow disease, only 30% say they will change their eating habits.
And the biggest changes they plan to make are better washing of
kitchen surfaces, better cooking of meat products and avoiding
imported meat. While the first two are certainly good steps to take
in better food handling overall, none of the three steps really will
do anything about Mad Cow disease or Bovine Spongiform Encephalopathy
(BSE-the correct name of the disease.)
FMI's food safety specialists say the real key points that should
draw customer attention are these:
Imported beef shipments from Canada were shut down as soon as
the problem was found;
The U.S. has had an aggressive program in place for years to
stop the entry of BSE into this country, and to date, not a single
case has been detected;
Human risk of the disease in the U.S. is almost non-existent
because Americans usually don't eat the parts of the animal that
contain the problem, such as the brains and spinal cords.
That's good to know, but it's even better information to share.
This is one case where misinformation and poor communication by the
industry can only hurt us. As SupermarketGuru pointed out, a
number of retailers are doing a good job communicating this
information to shoppers and doing everything possible to create
confidence in stores. That's great, but everyone has to be out front
and talking about these issues. (More information on BSE can also be
found at FMI.org.)
On food safety issues, the power of information is always made
very, very clear. What's made even clearer is the impact of the lack
of information. That's a situation the industry simply can't abide.
For more up to the minute news on Mad Cow visite the FMI website
at
www.fmi.org.
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Executive Decision Making Is Driven by Insights Derived from Integrated Content
Today, many top industry executives feel very dissatisfied with
information technology's ability to help them manage their business
and lead with innovation. I submit that there are several actions
that if implemented can truly improve this situation.
The business world built IT systems without considering how they
would eventually integrate data sources. No one foresaw that someday
finance, sales, marketing, HR, communications, distribution,
systems/operations would all need to be inextricably linked. Instead,
they all now maintain separate, distinct and rather inflexible legacy
systems. Consequently, as business needs evolved, systems were often
not flexible enough to adapt.
Without exception, senior leading executives are finally being
faced with the justifiable need to bring these systems all together
at what is being estimated to be enormous costs in time and capital.
What can be done? It is critical to take a few steps back to
conduct a strategic assessment of what your information needs really
are. It's important to evaluate different cost alternatives to
deliver "must have" information versus wanting everything. This
analysis must be done at the headquarters, regional, local and even
the store level in the case of retailers.
Ultimately, the goal is to develop a strategy to move from one
environment to another at the lowest possible cost.
1) Transformational change requires major league HR
involvement...you'll find the need to stop doing certain things.
2) To integrate is difficult. Legacy data sources are numerous
and quite complex. Equally as challenging is the need to create data
mining software that will facilitate the integration.
3) You'll need to write new DSS. There are lots of DSS tools out
there, but they are closed proprietary services developed around a
single data source for speed & volume...not integration of multiple
sources.
4) There needs to be a better, more overt linkage of line
functions with IT. They then can evolve over time once IT has a
deeper understanding of the various businesses' information needs.
5) The Internet is helping businesses get closer to a solution,
but the ability to dive deeply into data mining is not as sound as
the power of a closed DSS system.
Senior executives need to make decisions and run their businesses
based on insights derived from integrated content. The application is
easy...populating the data for those applications is the hard part.
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CHANNEL BLURRING: Driven By Consumer Changes
We know that heavy channel or top spending shoppers drive a
disproportionate amount of dollars in most retail channels. The top
third of shoppers can drive anywhere from 60 - 80% of channel
dollars. Understanding the key demographic segments that drive a
channel's shopper base is critical to
growth for both retailers and their suppliers. Knowing the
demographics of loyal or heavy retailer shoppers should be common
language in the halls of retailer organizations and in the minds of
all of the supplier reps who call on those accounts. With this
knowledge, a retailer and their suppliers can look for the
categories, brands, and items that have the best demographic fit
against the shoppers who visit their stores. Also, under-developed
demographic segments provide insight into sales opportunities for
both retailers and their suppliers.
Although the blurring of retail channels has enabled consumers to
purchase products in a wide array of retail channels and formats,
both traditional and non-traditional channels exhibit uniqueness in
terms of how they are shopped and who (demographically) shops their
stores. In terms of demographic differences across channels, here are
a few examples of this.
Relative to household size, big box retailers (i.e., Mass,
Grocery, Club & Supercenters) draw a disproportionate percentage of
their heavy shopper dollar sales from large households. On the other
hand, retail channels like Club Stores, Convenience/Gas, and Drug
Stores draw a disproportionate amount of their heavy shopper sales
from smaller households. How will increases in small households
(driven by the aging Baby Boomers) impact the retail landscape? Will
smaller formats be an opportunity to attract these shoppers?
Click on thumbnail to enlarge, or click here.
In terms of age of female head of household, Mass, Supercenters &
Grocery perform relatively better among younger female heads. The
Mass and Supercenter channels were the only channels to draw more
than 50% of their heavy shopper sales from females 44 & under. Club,
Dollar and Drug sales are heavily skewed to older female heads.
However, many of the larger Drug chains are spending considerable
energy in trying to penetrate younger female shoppers through new
store formats and modified product and brand assortment.
Click on thumbnail to enlarge, or click here.
Finally, in terms of household affluence, Warehouse Clubs do
exceptionally well among households with high discretionary incomes.
The Grocery channel is the next best at drawing sales from more
affluent households. Does this suggest that the Club format is a
greater threat or opportunity to Grocery retailers than the
Supercenter channel? For many Grocery retailers, it is important
that they understand shopper overlap with retailers like BJ's,
Costco, and Sam's Club and the categories that they buy when they do
shop those formats.
Click on thumbnail to enlarge, or click here.
For further information or to arrange a comprehensive
presentation on consumer shopping patterns, please contact Todd Hale
at
thale@acnielsen.com
or 859-905-4615.
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NICHE RETAILING: Organic Foods and Limited Assortment
Each year a new and exciting retail format comes out
and captures retail sales because of a unique positioning and/or
product offering. Some of these turn out to be complete failures,
while others have stood the test of time and continue to provide
consumers unique offerings that make these businesses viable. Here
are two examples of
how a few retailers have set their sites on a specific set of
consumers and created true niche positions in the marketplace.
Two U.S. retailers have done quite well by positioning themselves
in the retail space of offering natural and organic foods, and they
also offer a wide variety of prepared (or easy-to-prepare) foods.
Whole Foods is the number one U.S. retailer of natural and organic
foods with 142 stores. The company has announced plans to triple
their store count by 2010. Wild Oats is the 2nd largest natural chain
with 99 stores.
These two retailers have a high quality offering that does not
fit into the budget of all consumers. But for those consumers
looking for fresh, natural, or organic offerings and prepared meals
several steps above the standard fare available in most Grocery
stores, these two retailers
fill the need.
Relative to shoppers in the Grocery channel, Whole Foods
demonstrates much stronger appeal among upper income households.
Note that 6 out of 10 Whole Foods' shoppers have incomes of $50k +,
and they drive 66% of trips and 67% of dollar sales to Whole Foods.
Click on thumbnail to enlarge, or click here.
Sav-A-Lot and Aldi are two retailers that are doing a great job
of carving out their own unique niche by offering a limited selection
of Grocery products and other Household Goods at very low prices.
As a result, these two retailers do a terrific job of catering to
low income households. Both Sav-A-Lot and Aldi generate most of their
sales from households with incomes less than $29.9k.
Click on thumbnail to enlarge, or click here.
While U.S. Grocery chains look for ways to stop the erosion of
shopping trips to other channels, they can look to the successes of
these four retailers as they modify their offerings and target the
needs of the diverse set of U.S. consumers.
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ECONOMIC SNAPSHOT
A Sustained Rally or Bear Market Run Up?
With the Dow, NASDAQ, S&P 500 all up 17%, 24%, and 19%
respectively since the March 10th lows, economists are looking for
signs as to whether or not this is a sustainable rally driven by
strong 1st quarter earnings or another bear market spike as was
experienced after the October 9th lows. The markets appear to be
moving on solid earnings, geopolitical settling, fiscal stimulus,
weakness in the dollar and improving consumer confidence. One of the
strong signs of a bull market is its ability to react positively to
good news and shake off negative news. Such was the case on May 15th.
On that day the Producer Price Index (the measure of inflation at
the wholesale level) plunged lower than expected, a key gauge of
manufacturing activity Industrial Production declined larger than
forecast, and Factory Capacity came in at 20 year lows. Yet all major
indexes closed the day higher than their open. This is not to say we
are entering a bull market, but as the leading indicators will point
to, the second half of 2003 is shaping up to reflect a stronger
recovery.
An interesting aspect of this rally has been the relative strong
performance of the retail sector. The S&P Retail Index (RLX) with
gains of 29.4%, over the same period, has outperformed the Dow,
NASDAQ and S&P 500 (see chart). The RLX is a capitalization-weighted
index and includes 34 of the top retailers across a broad spectrum of
formats. Of the 34 retailers, 15 outperformed the average with
Consumer Electronic and Dollar Store retailers leading the way. One
fact underscoring the strength in the Dollar Store channel is that
qtrly earnings for Dollar General, Family Dollar and Dollar Tree all
exceeded analyst forecasts.
Click on thumbnail to enlarge, or click here.
Deflation Rears Its Ugly Head:
This recent positive news was shaken somewhat during the Federal
Reserves first post IRAQ Federal Open Market Committee (FOMC) meeting
on May 6th. The now well known statement "The probability of an
unwelcome substantial fall in inflation, though minor, exceeds that
of a pickup in inflation from its already low level" brought to the
forefront concerns of an historically critical factor in corporate
profits...pricing power. The Feds message was one of concern that
declining prices, slow growth and excess capacity could push the
United States towards a deflationary cycle. Deflation can be much
more damaging than inflation as it results in a continuous price only
consumer mindset. This impacts corporate revenues and forces
companies to slash costs impacting profits and consequently market
returns. With limited pricing power corporations look to increased
productivity and cost cutting to generate bottom line results, which
was clearly evident in 1st quarter earning results. However it is
important to note that the U.S. has been battling disinflation for
over ten years (See Chart) through innovation, differentiation,
information utilization and productivity strategies.
Click on thumbnail to enlarge, or click here.
A Look into Future Economic Trends - The Leading Indicators:
Finally, continuing on an analysis initially presented in the May
Issue of F3 is an update of leading economic indicators, those
designed to provide insight into future spending. What we see in the
most recent data is a split between the positive trends occurring in
the equity markets and a continuation of weak employment data. While
a 2nd half pickup is expected, the labor market will need to improve
in order to solidify the turn around (See Chart).
Click on thumbnail to enlarge, or click here.
INDICATORS TO WATCH - Given that the U.S accounts for
close to 20% of the worlds GDP and an economic slowdown in Europe,
the world financial markets will be closely watching the May
employment data being released on Friday June 6.
NEXT ISSUE - The previously communicated analysis into
the consolidation/merger rumors occurring within the retail industry
will be presented in the July F3 update.
For Further Information:
For further information or to arrange a comprehensive
presentation on the State of the Economy and its impact on the Retail
sector please contact James Russo at
James.russo@acnielsen.com
or 516-682-6068
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The Future For Mail-Order
The mail order business has changed dramatically over the past few
years with the adoption of the Internet by businesses and consumers
alike. According to a recent poll of
SupermarketGuru.com users, it appears that mail order shopping
over the Internet is going to get a lot more successful especially
when tied to sharp pricing and consumers' time constraints.
More than nine out of ten people who took the survey said
they had bought something using mail order, whether via catalog (35
percent), website (35 percent), or via email offer (21 percent).
The top sellers in the mail order category are apparel (18
percent of respondents had ordered it via mail order),
books/music/videos (15 percent), gifts (13 percent), and home goods
(11 percent). The lower use categories are fascinating and
unexpected -- sporting goods (four percent), toys/games (six
percent), and airline/movie/theatre tickets (seven percent).
Click on thumbnail to enlarge, or click here.
The most important factor motivating people to buy via mail
order was convenience, with 29 percent saying they made the decision
for that reason, followed by issues surrounding price - 18 percent
said that they bought that way to save money, and another 18 percent
said they got a "special offer." Least important, product variety,
which one would have thought would be important for a mail order
service freed from the constraints of a brick-and-mortar store.
Eighty-eight percent of our respondents said that they
purchased via mail order four times or more during the past year with
more than a third saying they did so more than 10 times.
Almost half of the respondents said that the availability of
mail-order services online made the option more attractive to them
with 92 percent saying that they expect to make more online purchases
in the future. This was a far more enthusiastic endorsement that
there was more catalog shopping or purchasing because of an email
offer.
Click on thumbnail to enlarge, or click here.
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COUNTRY-TO-COUNTRY: U.S. vs. Canadian Drug Stores
This month we take a look at some of the fastest-growing categories
in the Drug channel in the U.S. vs. Canada. It's intriguing with all
the talk about the growth of the grocery channel stronghold
categories in drug in the U.S. but appears less so in Canada.
Click on thumbnails to enlarge
Use this link if you've received the text version
for graph one (
http://www.factsfiguresfuture.com/enlarged/JuneC2C1.jpg
) and this link for graph two (
http://www.factsfiguresfuture.com/enlarged/JuneC2C2.jpg
)
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Good News For Foodservice
In the most recent Consumer Pre*View Survey that was conducted in
March/April of this year, we once again queried our Homescan Panel
about their future plans for eating out and found a significant
opportunity on the horizon.
Consumers had returned back to their home kitchens since the
attacks on September 11th and the War in Iraq: some for personal
safety issues, some for economic reasons and some just to reconnect
with their families. But it appears that that trend has leveled off
and may in fact begin to turn around.
When asked "do you plan to dine out for dinner more often, as
often, or less often during the next three months as compared to the
same time a year ago" the results shown below indicate that 72% of
the respondents said that they planned on eating out "as often" - a
24% increase over the same question asked a year before.
Click on thumbnail to enlarge, or click here.
The March/April 2002 Consumer Pre*View Survey reported that 36%
of respondents were planning on eating out "less often." Twelve
months later that percentage dropped to 24% (showing a decrease of
one-third). While only 1% of respondents in the 2003 Survey said they
planned on dining out "more often," it may well be the beginning of
the turn around.
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Magazines & Newspapers Are Ranked Number One!
As obesity levels reach epidemic proportions and diet books continue
to top the best-seller lists, retailers and marketers alike struggle
to find the best media to communicate their health messages. The most
used source for gathering information about both eating healthy and
exercise, according to the latest Consumer Pre*View Survey, is print:
magazines/newspapers rank as the first choice, followed by books.
Click on thumbnail to enlarge, or click here.
It's critical to understand that consumers, led especially by the
aging baby boomer population, seek out different information based on
the stage of their lives. It is only natural that as we get older,
our interest in life becomes more important, but the types of
interests must be categorized. In an earlier issue of F3 we reported
a significant difference in the reasoning for exercise: younger
respondents exercised to "look good" while older ones exercised to
"feel good." While the Internet shows the lowest ranking in this
survey at this point in time, it is safe to assume that as the
current generation ages they will seek out the media that they are
the most comfortable with, and the value of this media will increase
proportionately.
Click on thumbnail to enlarge, or click here.
Brand marketers and retailers should acknowledge that in order to
build a relationship with their customers or to attract new ones
based on health related subjects, it's the print vehicles, at least
for the present, which may be the most effective. As email
technologies (such as we use on F3) become more commonplace and
sophisticated, expect to see a shift and increase in the use of
Internet media.
While on the surface it may seem surprising to read that
television ranked behind the print vehicles, it's important to note
that as health information becomes more detailed (and at times,
conflicting), consumers want to have printed materials to refer to
and study in order to make their life decisions.
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Grocery Shopping in New Places
It looks like grocery shopping is going to be available in some new
places fairly soon! Sears has announced that it will add grocery
departments to select stores, Target is expanding its food selection
in its discount stores, and the Washington DC metro system will test
"super vending machines" that can carry milk and other chilled
products at some of its stations.
While businesses may be looking for new places to market food to
consumers, they may be doing something that consumers aren't
clamoring for.
In a poll of SupermarketGuru.com users, 70 percent of
respondents said they would not buy food at Sears, and 74 percent of
those who took our poll would not buy groceries from such a "super
vending machine."
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Facts, Figures and the Future is copyrighted and may not be
reproduced without prior permission. For more information about the
publication, please contact Phil Lempert at 323-860-3070 or via
e-mail at
PLempert@FactsFiguresFuture.com
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