Shoppers to Spend Less Freely in 2014

After three straight quarters of rising consumer confidence, index drops in Q4 2013

CHICAGO -- After three straight quarters of rising consumer sentiment, Susan Viamari and her colleagues at Chicago-based IRI thought they were finally seeing the light at the end of the dark tunnel of economic downturn.

But shopper sentiment dropped in Q4 2013, 10 points among millennials alone. “In the middle half of the year, throughout the beginning three quarters of the year, we saw consumer sentiment rising,” Viamari, editor of Thought Leadership at IRI, says. “We thought, ‘Oh!  Maybe this is it.’ But in the fourth quarter that shopper sentiment went down again.”

On the heels of that news, IRI’s MarketPulse survey finds that shoppers in general will be more conservative throughout 2014, with 39% feeling like their personal financial situation is worse today than a year ago.

“The economy is slowly returning to a healthier state, but the road has been longer and harder than anyone expected, and it has been littered with obstacles,” Viamari says. “As a result, consumers are holding strong to the strategies that saw them through the worst of the downturn.”

Going into the fourth year post-recession, consumers are still having a hard time stretching their dollars and can’t achieve their desired standards of living. The survey points to several reasons for why consumers don’t feel out of the woods just yet:

  • Eighty-three percent of consumers are having difficulty affording their regular groceries;
  • Thirty-nine percent feel their financial situation is worse today than one year ago;
  • Forty-three percent say their financial position is flat vs. one year ago.

As a result, the survey finds that shoppers will further trim expenses in the following ways in 2014:

  • Fifty-three percent are working to make personal care products last longer;
  • Fifty-one percent are finding ways to make cleaning products last longer;
  • Forty-nine percent are cooking from scratch more or using fewer convenience items to save money;
  • Forty percent are making beauty care products last longer by using fewer and using them less frequently;
  • Twenty-nine percent are sharing more products;
  • Ninety percent are eliminating unnecessary purchases;
  • Sixty-seven percent are making shopping lists prior to going to the store.

For c-store retailers, the survey results offer a mixed bag. On one hand, as prices rise, so do consumers’ negative perception of value: “When prices get higher, convenience stores struggle a little bit more,” Viamari says. “But they’re not perceived to have as much of a price play. What that boils down to is, in this type of environment, convenience-store marketers really need to underscore their value positioning.”

Viamari sees good opportunities for c-stores to capitalize on more conservative spenders. Unique merchandising opportunities in pump toppers and other outside merchandising should help drive sales inside the store.  Another good opportunity, according to Viamari, is in fresh and convenient food and drink. Consumers still need value-oriented food, even if they’re eating out less.

“Our results clearly indicate that 2014 will be yet another challenging year for consumers and CPG marketers alike,” Viamari says. “But both parties have demonstrated resilience and the ability to adapt quickly to challenges and opportunities. CPG marketers must hold on to that resilience this year and continue to provide shoppers with exciting products that make life easier and more affordable with a targeted value proposition.”