IRI: Dollar chains gain on traditional grocers
IRI's latest Consumer Connect Surveys have seen a boon for private brands and highlighted the role value and convenience play when consumers choose where to shop.
In the third quarter of 2019, the Chicago-based market research firm found that U.S. consumers across ages and demographics were buying more private label goods, increasing overall sales of private label by 4% in 2019 versus the prior year. By comparison, CPG goods rose just about 2%. The study went on to report how consumers had shifted their attitudes around private label and gained an affinity for it.
IRI's Q4 2019 survey found that consumers want to save money when shopping and save time as they shift their shopping habits toward channels that they feel best support them. All three of these trends could favor a private label market, but the study this time focused more on national consumer goods, and while the study projects a favorable outlook, the big trend could be growth toward value-based retailers.
“Consumers across the board cited time and cost savings as key drivers of where they choose to shop, which is causing a shift away from the channels that we are used to seeing dominate the CPG space,” said Joan Driggs, IRI’s vice president of content and thought leadership. “In particular, we found that heavy shoppers are being attracted to dollar retailers over competing channels, likely because they are looking for ways to save. We expect this will continue to negatively impact sectors like grocery and pharmacy, which have lost their ability to protect and cultivate their core shopper base.”
Where dollar chains are concerned, private label is a growing space. Dollar General, for example, has introduced four new private brands this year that the company has said will make a priority: Believe Beauty, Studio Selection, Good & Smart and Gentle Steps. Value chains like Aldi and Trader Joe’s lead with their own brands to serve shoppers quality and lower prices.
Looking at the shopping channels, the IRI study said traditional grocery, drug and mass still rate as the top channels, but that penetration in those retailers has decreased since 2016, suggesting that they're losing shoppers to other channels. Value retailers, which include dollar stores and e-commerce platforms, have seen 1.4- and 6-point increases in penetration, respectively, during the same time period.
The dollar channel saw an increase in the frequency of trips per month and per-trip spending compared with a year ago, relative to competing channels. E-commerce platforms also experienced a greater number of trips, but saw average basket size decrease.
IRI’s Consumer Connect Index also monitors the current financial health and outlook of consumers. The Q4 report revealed that overall consumer confidence has increased by nearly 1% since the Q4 2018 report, and is up 1.5% against the data from last quarter.
More than half (57%) of consumers reported that they feel good about their financial health, and 73% expressed confidence that their households’ economic well-being would improve within the next six months.
"Despite an atmosphere of economic uncertainty, consumer confidence and outlook remain favorable," Driggs added. "The optimism we recorded in our Consumer Connect survey is likely to have a positive effect on sales in the CPG industry, which we expect to continue growing incrementally through 2020, and exceed $886 billion by 2021.