Lower-income households’ CPG spending growth is outpacing higher income households’ in the United States and will generate $84 billion in incremental spending during the next decade, according to research from Information Resources, Inc. (IRI), writes Retailer Daily.
If retailers and manufacturers understand that lower-income shoppers are not a homogenous group, those consumers can represent an enormous opportunity during the slow economy, IRI said.
“The Lower-Income II Report: Serving Budget-Constrained Shoppers in a Recessionary Environment” reports differences and recessionary spending patterns and behaviors of lower-income micro segments driving CPG growth.
The report identifies five key lower-income micro segments it says will be responsible for many growth opportunities and uncovers variations in shopping frequency and spending levels as well as channel and category-level dynamics:
- Singles and married couples ages 25-34
- Seniors older than age 65
- Households with children
- African Americans
Private Label and Categories
During the third quarter of 2008, CPG spending and private-label performance has improved – a trend led by lower-income shoppers.
However, most retailers are still missing the mark on their private label offerings and marketing to lower-income shoppers, who represent the largest private-label opportunity in the next five years, IRI said.
Retailers can drive private-label growth if they focus on building stronger relationships with lower-income shoppers by improving variety and packaging, IRI said.
Compared with other income groups in today’s economy, budget-constrained, lower-income shoppers are shopping more frequently, but are spending less per trip. They are also aggressively shifting spending across channels, retailers, categories, and brands.
In addition, younger households and households with kids are driving growth across key food categories.
African-American and older household spending has increased notably in salty snacks and chocolate candy, and Hispanics have increased their spending on frozen dinners and cereals, according to the report.
Retailer Action Steps
Retailers can make the most out of their own unique opportunities by working with a four-phase process, according to IRI:
- Value the size of the business opportunity and investment implications
- Use lower-income household segmentation as a means to differentiate from competitors
- Understand lower-income spending nuances and proactively adjust store offerings
- Validate the required steps towards success and execute and drive the process
About the report: “The Lower-Income Shopper Report: Learning to Better Serve Lower-Income Shoppers” includes a four-year analysis of shopping behavior across five lower-income segments and an IRI AttitudeLink survey of shoppers, case studies, and secondary research to develop an understanding of the marketplace and factors affecting lower-income households.