Cash-Strapped Consumers and the Discount Grocery Revolution
Economic recession, recovery and realignment have been major drivers of change in the values and food shopping behaviors of America’s consumers, according to findings from The Hartman Group’s The Business of Thrift: Understanding Low-Income and Value-Oriented Consumers report. As the U.S. economy continues to shift, understanding and meeting the needs of low-income consumers in the U.S. has never been more critical, especially with the growth being witnessed in discount grocery shopping.
Most consumers engage in thrifty behaviors — especially in their household shopping — because this type of frugality is culturally valued. However, for mid/high-income consumers, frugality is more of a choice, whereas for low-income consumers, it is a necessary way of life. The market for those who are financially challenged is significant. As noted in a recent Winsight Grocery Business article:
By some definitions, those struggling to make ends meet could be larger — and growing. Consumers making about or just less than 400% of the federal poverty level — criteria to be eligible for federal healthcare assistance, for example — comprise more than half of U.S. households and include consumers one might otherwise consider “middle class,” says Sarah Marion, director of syndicated research for the Hartman Group, Bellevue, Wash. “It reaches into the middle class a little bit,” Marion says, “but once we saw the data, the shopping patterns are really different once you cross that line. Those households have to make difficult budgeting decisions every day. It’s, ‘Are we going to have health insurance or are we going to send Johnny to camp this year?’”
As our Business of Thrift report finds, for many shoppers, saving money is largely a necessity rather than just a trait practiced out of virtue. We find that these households, because of their economic circumstances, have different habits when it comes to grocery shopping when compared to mid- and high-income shoppers. We find that low-income-related limitations on food purchasing reach well into the shrinking American middle class. While certain parts of the economy are booming, many consumers are still working to come out from underneath the Great Recession’s long shadow.
While traditional food retailers continue to serve their shopper base with aggressive couponing, gas points and loyalty programs, it is important to understand how low-income customers shop in order to make promotions more appealing. Specifically, retailers and manufacturers should consider the following:
- Online shopping could solve some of low-income shoppers’ access to food retailers and food insecurity difficulties and help increase basket size. However, current perceptions of extra fees and membership costs associated with online programs make digital buying prohibitive to low-income shoppers. This is a missed opportunity, since Millennials and parents — precisely the groups that are most likely to shop online — are also more likely to be low income.
- Make coupons more useful to low-income consumers by making them more convenient. Consider partnering with a coupon app or developing an easy way to access coupons in-store, such as scanning a card or app upon entry that automatically downloads all available coupons without the hassle of logging into an account or selecting coupons to load.
- Low-income and value-oriented shoppers are often already buying the lowest-priced item — typically generic or store brands — and therefore have less use for coupons, loyalty points or bulk buying. Tailoring promotions to low-income shoppers’ savings strategies can help increase basket size and help them get more for less. Highlight total cost savings over item savings and ensure promotional pricing applies to smaller amounts/sizes.