Shopper Buying Behaviour - Insights from the NFU Conference

Edward Garner of Kantar Worldpanel ( previously called TNS) spoke yesterday about whether recent events like the move away from discounters, a decline in sales of value ranges, the resurgence of Waitrose and a swing to buying premium food over Christmas heralded the end of recessionary food buying behaviour. He did not offer a conclusion but en route to a fence sitting finale he did offer interesting nuggets about shoppers and the way they buy from the major supermarkets.

ASDA
The main message here is that ASDA is all about lowest price. When questioned, the overwhelming reason consumers give for shopping at ASDA is low prices., and it is ASDA who has gained most from the trend away from discounters. ASDA’s most recent price wheeze is to sell at a “round pound” price point, and in the last 12 weeks items priced at £1 have accounted for 14% of all sales. The round pound price point extends to £2, £3, £4 etc, and in total accounted for 22% of sales. Suppliers are being encouraged to tailor their products to sell at these particular prices.

The other side of the coin is that ASDA are not rated highly on quality. They undertrade on fresh and chilled foods, meaning their share of these is less than their total share, sales of their premium range are falling, and their organic sales are down 25% in the last twelve weeks, the worst performance of all supermarkets. (Note that ASDA would argue that they have upgraded quality and won lots of awards, but the Worldpanel figures suggest shoppers are not on the same page.)

Edward Garner did not say, but this obsession with price, coupled with a slight share decline over Christmas, may explain why Andy Bond who runs ASDA took the odd step of doing a public video in which he lambasted suppliers for not reducing prices when costs fell back , preferring instead to offer promotions which he termed “Weapons of Mass Distraction”. Bond declared that ASDA would “return with force” to its “Every day Low Price Strategy”, which he believes is best for customers, suppliers and shareholders. Other supermarkets might disagree.

Morrisons
Morrisons tends to be lumped with ASDA as a low price store, and certainly is seen by customers as offering good value, but it is changing its image and performing well. Morrisons overtrades by 3% in fresh and chilled foods, and by a huge 14% in fresh meat. As Garner says, something for farmers to be aware of. Also Morrisons is growing its number of wealthier customers, classed AB’s, who generally have more spending power.

Tesco
The news here is that their premium range is growing, and their discount range, introduced to fight Aldi and Lidl, only accounts for 1% of sales. Apparently the claim to be Britain’s biggest discounter backfired as we shoppers do not like to be told that we are buying cheap goods.

Waitrose
Waitrose has been doing well as shoppers get over the shock of inflationary price rises. Essentials, which Garner stressed is not a value range, but rather a communication exercise designed to make shoppers re- evaluate the store, has helped.

Marks and Spencer
Still a big problem, due to a lack of regular customers.

Fair Trade, Organics, Local Foods, and High Welfare
Sainsbury remains the biggest seller of Fair Trade products, and Waitrose sells 4.5 times more organic produce than its market share. However organic food has still not regained its position and Garner feels that the term organic will become a statement of production rather than a prime reason to buy.

Local Food sales are booming, and supermarkets are increasing the shelf space devoted to them.

High welfare products also continue to grow. 60% of all eggs sold in retail are now free range, despite costing about 30% more to buy, and free range chicken sales are also growing albeit at a slower rate.

Garner ended by saying that many industry watchers feel recessionary food buying habits may not have gone away because tax rises and spending cuts will breed uncertainty. On the other hand, he said, food only accounts for about 8% of overall consumer spend and so may not be the first port of call for consumer cutbacks.

If asked to come down on one side or the other, I’d say that there will be no return to unthinking spending any time soon, that people will pay for what they value whether it be premium ingredients or ethical beliefs, and not just follow lowest price, and that poor quality will not be tolerated.

Consumers and Shoppers – The Importance of Understanding the Difference.

From The Institute of Grocery Distribution comes a timely reminder of the difference between shoppers and consumers, consumers being the person who ultimately eats or uses a product and the shopper being the one who buys the product from the shop. Sometimes they are one and the same person, but not always. An example would be mothers buying food for the family where Mum is the shopper but the family eats what she buys (mostly!). Or in the case of a gift, the shopper buys but the consumer is the recipient. And when in the store, what someone feels as a consumer can be trumped by the immediacy of making a shopping choice.

The notion of differentiating the two has been around for years, but the point the IGD makes is that shopper understanding has become a multi million pound science. Retailers, engaged in a ferocious war for market share, are spending vast sums on understanding their shoppers in a climate where people are very picky about how they spend their money, and low inflation makes it doubly hard to get sales growth.

So, in this shopper is king (as IGD calls it) environment, suppliers approaching a retailer stands a better chance of getting heard if they bring deep knowledge about the way people shop for their particular product. Finding fresh insight is not easy given the enormous amount of data possessed by the retailers themselves. Tesco for example via their 83% owned subsidiary Dunnhumby reads the data of 22 million Clubcard holders every year.

Having said that, increasing sales is not just a matter of numbers, its also about psychology. IGD tells us that 70% of brand choices are made in store, and that 68% of product purchases are made on impulse. This seems a high number but it is not difficult to imagine products suddenly finding themselves in the shopping basket as a result of a stunning display, a slot alongside an obvious partner, or simply because it solves a shopper’s problem like what to dish up for dinner.

The snag with all this of course is that it stretches suppliers’ profits even more thinly. Not only do they have to be able to give retailers the margins they want, and cough up increasing sums for value based promotions, they now have to match retailers in shopper understanding, as well as spend money on marketing to build their brands with consumers.

This may give a clue as to why the big branded manufacturers want to get bigger. Size gives them the economies of scale they need to handle retailer demands both in the UK and globally, for the same retailer game is being played world wide. Such pressures may help explain moves like the Kraft bid for Cadbury.

It is clear though that anyone who supplies products under a retailers own brand name must be very conversant with shopper behaviour.

Which leads to an interesting dilemma for the levy boards - DairyCo, EBLEX, BPEX et al. Are they better spending money on broad messages to the consumer, as EBLEX have just started to do again, or would it be more productive to carry out forensic, in depth research on shoppers.

I'd vote for shopper research on the grounds that the findings would be valuable to all producers, large or small. No concrete case has been made about whether generic advertising works, yet a thorough understanding of how people shop a category could lead to fresh ideas and a much needed rise in sales.