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Signals Point to Ever-Cautious Consumers

August 22, 2013

In the past week, we’ve seen both Wal-Mart and Target delivered results that didn’t meet expectations. Both companies placed the blame on weak US consumer demand, with Wal-Mart citing increases to payroll tax as having a big impact on spending and Target’s CEO mentioning his belief that the US consumer will continue to spend cautiously for the remainder of the year.

These results confirm the findings from market researchers IRI and Nielsen in Q2 2013.

Nielsen has an interesting measure of intentions by identifying the percentage of consumers who intend to save v’s spend across categories. The numbers who want to save are still very high, at close to 50% for entertainment, grocery and take-away meals and these numbers didn’t really shift Q2 over Q1.  (click to enlarge). 


IRI, with its MarketPulse study Q2 2013, shows that despite the supposed improvements to the economy, shoppers are behaving very cautiously and that the slew of promotional activities from CPG companies were having a diminishing impact.

IRI found that over 50% of shoppers chose their primary grocery store based on price, with an significant use of circulars and websites to compare and identify low prices. Brands can’t place too much reliance on in-store promotions, because IRI found 56% of shoppers chose the items they want to buy before they even set foot in the store.

The other big force impacting spending are gas prices, which this year have seemed to fluctuate with increasing regularity. IRI found that if there’s an increase of 50cents on gas prices, 44% of consumers would cut grocery spending, so IRI’s suggestion is that marketers need to keep a very close eye on gas prices.

Wal-Mart is clearly concerned with the situation and doing everything it can to capture shoppers, it’s latest initiative being its layaway program for the Holidays. It’s making it free for the first time, available on 35k items and giving customers 90days to pay. The program starts on September 13th.

Outside of core retail and in fast-food, McDonald’s is one mass brand that’s managing to find a little bit of growth through its aggressive direct marketing efforts and new product launches to compete in breakfast and snacking occasions.

It’s clear that US consumers are still far from out of the “recession” and their cautious approach to spending is presenting a considerable challenge to most brands.

The only way for brands to compete is to continue to innovate in order to bring new experiences and offerings to the market, the development of breakthrough marketing efforts to highlight these differences, everyday low pricing and smart tactical promotional efforts.



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