Saturday, November 8, 2008

Wall Street Journal: At the Supermarket Checkout, Frugality Trumps Brand Loyalty

In the end economics trumps all... should be interesting for a country where much of the populace pays up for "brand". As we said in many previous entries - Americans will turn into savers, voluntary or not. "Back to Basics" is going to be "hot" (Right, Paris?)
  • When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses. "I thought I'd be able to tell the difference, but I couldn't -- I looked at the ingredients and they seemed almost the same," says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, "I'm going to buy the store-brand moisturizer and cleanser -- it's less money."
  • Many Americans are changing their everyday purchases and abandoning brand loyalty, prompted by the persistent financial pressure of rising food, gasoline and electricity price. From coloring hair at home instead of at the salon to trying cheaper laundry detergents, new evidence indicates that Americans are modifying even minor household habits to save money.
  • Kimberly-Clark Corp. CEO Thomas Falk noted that sales of the company's potty-training pants, once one of the biggest sales-growth products in the baby aisle, have fallen off in recent months. "You're seeing consumers leaving children in diapers longer...the diaper is less expensive per piece than a training pant," he said in a recent conference call in which he announced a 9% decline in third-quarter earnings.
  • Shoppers are even buying toilet paper differently. "When they get to the end of the month, and they're out of paycheck, they may buy a smaller-count pack," Mr. Falk said. "You're seeing that shift in consumer behavior during a pay-period cycle more than we maybe have in the past." (we pointed this out many months ago as Walmart mentioned this "end of paycheck cycle" situation in their monthly updates - in the past when people ran out of paycheck they ran to their house ATM or credit cards - now they are running out of options)
  • To be sure, overall sales of name-brand goods are still higher than those of store brands. Still, about 40% of primary household shoppers said they started buying store-brand paper products because "they are cheaper than national brands." Store brands on average cost 46% less than name-brand versions, Mintel found. (makes sense to me) "And upper-income people are changing their patterns the same way that lower-income people are. Though low-income consumers have been cutting back for the past several months, now upper-income shoppers -- those with household incomes of $100,000 or more -- also are making significant changes, according to a new survey by IRI. (Ask Whole Foods Market about that...)
  • Paper napkins suffered the steepest declines over the past year, followed by facial tissue and paper towels. "Not surprisingly, toilet tissue is holding up the best," Mr. Lockwood says.
  • Laundry habits are changing, too. Early signs indicate shoppers are switching to cheaper detergents and softeners, a rare shift in one of the most brand-loyal product categories. Sales of private-label detergent rose 12% over the 52-weeks ended Sept. 6.
  • "This isn't belt-tightening, it's belt-notching," says Thom Blischok, president of consulting and innovation for IRI. "These ritual changes are much deeper and happening much faster than we expected."
  • Meanwhile, private-label versions of soap and other bath products are up 23% in the 52-weeks ended Sept. 6, to $168 million, according to Nielsen Co. Private-label versions of skin-care items are up 16% to $182 million during the same period.
Again it is all relative - a "poor" person in the US lives a life of luxury versus 80% of the globe's inhabitants but it goes back to "will you live a better lifestyle than your parents" (outside of obvious technological advancements that will improve all our lives). I think for the first time, Americans will need to honestly ask that over the coming decade(s). The items in this story are just minor adjustments... to pay our long term obligations as a nation "belt - notching" is going to take on a whole different meaning.

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