Todd Hale, James Russo, Jonathan Banks and Jean-Jacques Vandenheede, The Nielsen Company
SUMMARY: Are consumers shopping more often? Spending less? Buying more store brands? Shifting channels? How are retailers responding? The Nielsen Economic Current tracks trends in 11 linchpin countries, indexes financial health and predicts growth trends on critical measures including GDP, consumer spending, inflation, market value and volume indices.
According to the Nielsen Economic Current (NEC), we can expect a global slowdown in 2009 gross domestic product to a lackluster 0.4%, with significant declines in North America and Western Europe. Post-recovery, NEC predicts that an ailing economy will recuperate below potential, only to plateau at a level below past rebounds. Fortunately, the fast-moving consumer packaged goods industry is holding its own, with price increases offsetting negative volume trends and private label benefiting from frugal shoppers.
The monthly Nielsen Economic Current provides global, regional and country-focused insights into consumer and retail trends around the world, including topics such as: market index volume expressed in units and country currency; retail channel shifting; shopping frequency and spending; and overall consumer confidence. NEC leverages the vast Nielsen warehouse of global data about tens of thousands of products bought by consumers in almost every nation on earth. The NEC was developed in partnership with UBS, one of the worlds leading financial firms.
|Shift office conversations from gloom and doom scenarios to opportunity identification...|
The influential eleven
To construct this current economic overview, Nielsen tapped into its unparalleled database of consumer packaged goods transactions across relevant channels and added data from a carefully selected set of eleven bellwether countries whose economies serve as leading indicators of economic trends: United States, Canada, France, Germany, United Kingdom, Italy, Spain, Brazil, Russia, India and China.
A proprietary global economic index ranked by country for each category facilitates growth comparisons and enables managers to shift office conversations from gloom and doom scenarios to opportunity identification based on consumer confidence measures and shopping patterns.
At the most macro level, the December 2008 NEC Global Top-Line summary noted a slowdown in global unit sales as the recessionary impact intensified. Conversely, dollar sales growth proved more resilient, in excess of 5%, as commodity prices drove value sales. Inflation levels are expected to continue to fall, with deflation now becoming another concern in some countries.
Thrifty consumers around the world are stocking up on store brands to stretch available funds. Another indicator of penny-pinching behavior is the continued shift toward value channels that reliably deliver savings. Despite the consumer hunger for bargains, most retailers have not dialed-up in-store promotions in response to this demonstrated need.
Perhaps prompted by higher than average gas prices, shoppers are bundling trips and shopping less frequently than in the past. While the number of trips may be dwindling, the register rings are increasing, although the ticket size is beginning to show some signs of weakness.
Overall, the Nielsen Global Consumer Confidence ranking is very negative, plummeting to recessionary levels and expected to remain in the cellar for the near future. Only 9/52 (3/11) countries record a positive confidence index whilst 44/52 (9/11) scored lower in October than in April.
On a country-by-country comparative basis, the news varies widely. On the Nielsen Market Index/Volume, a measure of unit sales changes, four countries reported negative results in the -1% to -4% range (United States, Canada, France, Italy), five countries recorded virtually no change (Germany, United Kingdom, Spain, Brazil, Russia), and two countries outperformed their peers with better than 5% growth (India, China).
|Shifting the view from volume to value or currency, the results were much more positive...|
Shifting the view from volume to value or currency, the results were much more positive, with nine of 11 countries experiencing growth, five countries exceeding 5% and four countries in the 1% to 4% range. Only Germany and Brazil ended up with no-growth scenarios.
Aggregating from individual countries to regions, the NEC summarizes findings into two helpful categories: what you need to know, and what to do now that you know it. The BRIC ( Brazil, Russia, India and China) regional summary for December notes that Brazil is an outlier in the group with low volume growth and low inflation, where consumer confidence is on the rise from a low baseline.
Conversely, India’s results indicate waning consumer confidence dropping from a high baseline, perhaps associated with an inflationary trend that peaked at 13% in August. Anticipated GDP growth will be modest for the region, with the exception of China and India, which could see increases in the 6% range.
|Plan for the long term by investing to shore up brand and banner equity...|
Against that background, the NEC suggests that marketers plan for the long term by investing to shore up brand and banner equity and spending to gain a deeper understanding of consumer motivation. Given ever-tightening budget constraints, the need for efficient, precisely targeted marketing becomes even more pronounced.
A bold move that can pay dividends under these market conditions would be to launch new products with a demonstrated ability to meet a consumer need, deliver on the concept promise and enter the market with appropriate marketing support. It’s a chance to grab share of mind and wallet while competitors sit on the sidelines.