Consumer focus shifts as thrifty shopping trends continue through recovery

Consumers are sticking to frugal shopping habits developed in the recession, even as developed economies show signs of recovery, suggesting some behaviour changes could be permanent, say industry executives.

Industry leaders in London and New York, participating in the Reuters Global Consumer and Retail Summit, said under-pressure consumers have flocked to discount stores since the financial crisis of 2008.

Consumers have shifted from branded goods to private-label alternatives and shopped more often at convenience stores or online rather than spending on expensive fuel to drive to out-of-town hypermarkets.

Those trends have benefited discounters like Aldi and Lidl, as well as retailers that have the widest own-label ranges and networks of smaller stores, prompting consumer goods firms to retaliate with brand promotions and smaller packaging.

“If you look at data from Millennials, who have really sort of grown up with this, price is more important to them... than it was to the last generation,” Walmart US chief executive Bill Simon said, referring to the generation born between 1980 and 2000.

Walmart US is the largest unit of Wal-Mart Stores Inc, the world’s largest retailer which benefited from trading-down during the recession, but cut its forecasts last month, citing weak results in many key markets.

The US economy is expected to accelerate towards the end of the year, helping cut unemployment, while the eurozone’s tentative recovery looks set to continue, although wage growth will continue to lag inflation, dampening purchasing power.

Rabobank expects private-label goods to double their share of food retail to 50% by 2025, from 25% in 2010, although growth has slowed in some mature markets as brands and stores have launched promotions like “buy one, get one free”.

“The moment they stop with promotions, private label grows again. It is a temporary effect,” said Rabobank analyst Sebastiaan Schreijen.

A Euromonitor survey from 2011 showed that three quarters of US and British consumers expressed a strong interest in finding bargains, with a majority of Brazilians, Germans and French also keen on a good deal, while fewer than half of Indians, Chinese and Japanese were bargain hunters.

“It is now ingrained for people to wait for the sales. The sales have become ongoing and constant,” said Euromonitor senior retailing analyst Antonia Branston, adding that other habits such as shopping around for food deals might be less enduring.

“It became quite fashionable to be penny pinching but that kind of thing isn’t sustainable. After a while it becomes a grind to shop around for the cheapest product,” she said.

Rabobank expects the squeeze on mid-range products to persist, predicting that value products will make up 30% of spending by 2017 from 25% now as premium products grow to 20% from 15%.