Last updated on December 30th, 2013 at 10:03 am
Consumer confidence is up in our economy, but it’s still somewhat tenuous. The housing market is doing well and prices are rising, but there’s still some volatility. Unemployment is falling in the labor markets and it’s driving down income. If we continue to see income fall as it has been, businesses will struggle more because people just don’t have the money they need to spend and shop.
Those factors are a big reason why value is so important to median households these days. Retailers, wholesalers and supplier companies need to figure out a way to help people at the lower end of the income spectrum, such as younger people, and be aware that it’s going to be challenging for the boomers who will be retiring soon and expect those young people to pay more taxes to help with government support systems.
During a business session at the GMDC 2013 General Merchandise Conference, data was presented to reveal that hardware and home improvement categories in the latest quarter had shown tremendous growth in sales. With people back spending money on their homes for the long term, that’s a sign of consumer confidence and reinvestment into what they believe is secure in their life. Some of that is being reflected in the overall performance in retail supermarkets since they are up 7 percent in terms of dollar sales year after year, which is having a positive effect on general merchandise and health/beauty/wellness products.
According to the GMDC Nielsen GM Hierarchy that is being published in early 2014 and tracks and codes all GM product in the grocery channel, the GM industry is worth about $206 billion. Value format retailers have the biggest piece of GM sales overall, but it’s flat, while supermarkets are growing by a little over 1 percent in GM. This is a great opportunity to the supermarket industry and gives businesses an indication of where the consumer is shifting their purchases. The five top-selling GM categories in grocery chains are pet, candy, baby, household and social expressions. When you look at overall growth rate year after year, seasonal, social expressions, sporting goods, electronics and apparel are the top five fastest-growing GM categories in supermarkets.
Some challenges we see in GM are a decline in share of shelf in grocery, despite the channel growing in GM dollar sales. In this age of value, lowest prices for GM and HBW cannot win in the end; it has to be a combination of delivering benefits, a better lifestyle and convenience to consumers. When you deliver benefit, you usually can deliver it at a premium.
In the HBW industry, the impact of government healthcare is preparing retailers for a greater role in healthcare delivery. Stores increasingly address both acute care and preventative needs at a time when millions of Americans lack access to primary care physicians, and most who struggle in this economy feel they can’t afford to get sick so they’d better act more responsibly for their own wellness. This provides a sweet spot for stores: pharmacy and OTCs/nutritionals continue to anchor the retail-health portfolio, while clinics are on the rise. Retailers are increasingly trying to connect the “better for you” food and non-food sides of consumer health more closely.
The opportunity here is for stores to optimize their health offering in order to overcome external and internal challenges. They must define and assert their larger roles in a market drastically affected by economic and legislative change; they must advance their case to health officials and the public to heighten enthusiasm and growth prospects and allow pharmacies to play a bigger role in helping the consumer.
Mark Mechelse joined Global Market Development Center (GMDC), located in Colorado Springs, Colo., in 2011 and serves as the director of research, industry insights and communications. He represents GMDC’s wholesaler/retailer and supplier members. His previous 18-year experience across various CPG industries and channels provides the association with enhanced member service programs and education, and a unique perspective into vital consumer lifestyle and development trends.
