Despite overall bleak headlines about retail’s slowdown in the last year, there are still some pockets of growth happening across the U.S. grocery retail landscape. To understand where these pockets exist, retailers must first understand the dynamics of consumers’ shifting shopping habits in recent years across channels.
For the first time in over a decade, shoppers actually made more trips to stores, taking an average of 109 trips per household in 2016. However, despite this increase in trips, overall spending was flat, as 85% of those additional trips had smaller basket sizes (less than 15 items per trip) compared to the year prior. More frequent trips with smaller basket sizes leads to less worth in dollar sales for retailers.
One channel worth focusing on is deep discounters that offer value and heavy discounts (not including dollar stores). For many retailers, but particularly deep discount retailers, store brands (also referred to as private label) play a strategic role for winning over shoppers from other channels. Compared to other major retail channels, deep discounters have more than twice the store-brand share of dollars.
Store Brands Drive More Trips in Deep Discount and Online Grocery
While consumers are taking more trips across most retail channels, deep discount grocery is seeing some of the largest increases in shopper activity. In fact, while trips across all channels are up 0.5%, shoppers took 2.8% more trips to deep discounters over the last year. However, only about 40% of households shop at deep discounters, which is much lower compared to more established channels like supermarkets and mass merchandisers. For deep discounters, there are still significant opportunities for growth ahead, unlike the already saturated conventional grocery channel.
What’s more, deep discount grocery and online channels were among the top growing beneficiaries of consumer spend leakage from mass merchandisers. With online grocery sales anticipated to reach $100 billion by 2025, e-commerce will continue to siphon off sales from other channels. Part of the reason consumers are going online is because they’re seeing value, spending more per trip on store-brand purchases made online ($17 average) compared to the total average basket spend on store brands across all channels ($12 average).
Three Departments Driving Store Brand Sales in the Deep Discount Channel
When it comes to deep discount grocery chains, store brands comprise a majority share of sales in three departments: dairy (72%), grocery (52%) and frozen food (53%). This is driven by both penetration and trips, with consumers making more trips to purchase store-brand grocery, dairy and frozen products (up 3.3%, 5.7% and 3.7% in trips, respectively, compared to the prior year) than trips made for branded products from these departments.
Deep discount grocery retailers are certainly reaping the benefits of having a robust store-brand presence within their stores. With consumers taking three times more trips including store-brand purchases to deep discount grocery stores compared to other channels, like mass merchandise or dollar stores, opportunity for growth should only continue to rise.
While deep discounters have significantly high store-brand growth, there is still room for penetration growth across all retail channels. Whether a deep discounter, a traditional supermarket or an online channel, retailers should continue to keep store-brand strategy front and center as a way to offer consumers the value and quality they’re looking for at price points that resonate with their wallets.
Insights from this article were derived from:
- Nielsen Homescan, Total U.S., 52 weeks ended April 29, 2017 (UPC-coded items)
- Nielsen Answers Panel, 12 weeks ended Jan. 28, 2017