With inflation at a 40-year high and wage rises failing to keep pace, you could be forgiven for thinking that shoppers are stripping the shelves of all the entry-level value products and leaving all the more premium lines to gather dust. BUT… you’d be wrong.
The number of shoppers who describe themselves as ‘struggling financially’ is increasing. However, the latest data shows that almost three-quarters of shoppers (73%) are either ‘managing’ or ‘comfortable. These shoppers do have money to spend, and they will spend it on things that they perceive as being good value. They will trade up and buy premium products from time to time.
The important but subtle point is that whilst the majority of people do have money to spend, most have less disposable income than they did last year. This is affecting people’s spending choices, but different people make decisions in different ways.
One shopper’s trade-down is another shopper’s trade-up. Take coffee as an example. A high-spending shopper might switch from buying a Costa or Starbucks every day to investing in a Nespresso machine and a decent travel mug and making their own coffee at home. Likewise, a regular Nespresso drinker might switch to premium filter coffee instead. Both of these examples show the shopper making a value decision to save money, but neither Nespresso pods nor filter coffee would be classed as ‘entry-level value’ products. To a retailer, these purchases would look like a trade-up compared to entry-level instant coffee.
Shoppers make value decisions based on a number of factors.
Understandably, budget is a key consideration for those who are struggling financially. These shoppers have adopted a number of techniques, including more frequent shopping trips to help manage a budget, and shopping in local stores to cut down travel costs. Some have reverted back to using cash, to help make sure they only spend what they have.
There are many value shoppers for whom a fixed budget is less of an issue. These shoppers will buy in bulk if it helps save them money. They will buy multiple packs on promotion or trade up to larger sizes to reduce the cost per use. Some shoppers are moving away from online shopping because they perceive deals in-store to be better, and there is a sub-group of shoppers who will time their shopping trips to maximise their chances of finding ‘yellow-sticker’ bargains on short-dated stock.
Ultimately, the value equation comes down to ‘what I get’ measured against ‘how much it costs’. No surprises there… but the ‘how much it costs’ part increasingly includes travel costs, and ‘time taken’ is important for those juggling busy lives.
So what..? Well, if you’re a retailer or a wholesaler, you can make it easier for shoppers to choose you.
Firstly, stock a full range that includes premium products. Don’t be tempted to gravitate towards only having entry-level value SKUs. Many shoppers are brand loyal, so stock the leading brands as they give shoppers the confidence that they’re buying a good quality product (remember – the top part of the equation is ‘what I get’, and quality is important).
Secondly, make sure your store or depot is easy to shop. People are busy and many want to be in and out as quickly as possible. Use good merchandising conventions to help the shopper find what they’re looking for. There is advice for convenience stores in our annual Category Insight Guide, and if you’re a DCS customer we can offer you bespoke recommendations – just contact your account manager.
Many shoppers will be enticed by the opportunity to get everything they need in one place. That’s why supermarkets are so successful, right? So make sure you’re covering all the key shopper needs before you start doubling up on other brands or different SKU variants (e.g. colours, fragrances, etc). For example, make sure you have a multipurpose cleaning spray and a kitchen spray and a bathroom spray and an antibacterial spray and a window cleaning spray and a shower spray and a limescale remover spray before you start doubling up on brands and fragrances.
That’s all for now. You can find more advice in the other Category and Insight features on this website, and on our DCS Insight YouTube channel.