Research on lower-income ethnic shoppers shows $115 Billion opportunity Even in a challenging and rapidly changing marketplace, lower-income shoppers will generate $115 billion in incremental spending during the next decade. However, they are one of the most misunderstood, ethnically-diverse and underserved shopper segments in the United States. To help retailers and manufacturers truly grasp the behavioral and attitudinal differences across five key lower-income micro-segments, SymphonyIRI Group, Inc. is releasing its fourth annual research report, "The Lower-Income Shopper Report: Serving Lower-Income/Multicultural Shopper Micro-Segments."
"Many retailers and manufacturers take a one-size-fits-all approach to reaching lower-income shoppers, but with a $115 billion opportunity at stake and increasing competition to win their share of wallet, a mass market view of these shoppers will not be enough to win their loyalty," says Sean Seitzinger, partner, Symphony Consulting, SymphonyIRI Group. "Only those retailers and manufacturers that embrace a micro-segmentation strategy to truly understand the needs and wants of these varied, nuanced, and multicultural shopper groups will be able to serve them effectively and profitably."
"The 'Lower-Income Shopper Report' exemplifies our continuing commitment to be industry leaders in providing actionable thought leadership to the CPG industry," says Dr. Krishnakumar (KK) S. Davey, managing director, Symphony Consulting, SymphonyIRI Group. "Specifically, this report will help the industry better understand the current and emerging needs of lower-income shoppers, so that retailers and manufacturers can tailor their offerings for the varied lower-income/multicultural micro-segments." Lower-Income Micro Segments The "Lower-Income Shopper Report" is built on a four-year history of shopper behavior across the following five lower-income/multicultural segments and examines what is important to each group and what it will take to be successful in serving their changing needs: Hispanic households, African American households, young households aged 25-34, older/senior households aged 65 and older, and households with children. Shopping and Spending Trends
Lower-income consumers frequently shop but generally spend less per trip than average, often shopping with only a paycheck or pocket cash. African American lower-income consumers make the most retail shopping trips per year with 177 trips, seniors make 169, and Hispanics make 168. Lower-income households with children spend the most at $39.65 per trip, followed by younger households at $37.58.
Although lower- and higher-income shoppers both report careful trip planning, more than half routinely make unplanned purchases while in the store. At the same time, 49 percent of lower-income shoppers are much more likely to track their spending during the trip and make budget driven decisions on the fly versus 38 percent of higher-income shoppers. Economy During the past two years, half of lower-income shoppers report that they have decreased spending in discretionary areas, including home furnishings and furniture, in order to better afford essentials, such as food and healthcare. For example, spending on clothing and shoes has decreased by 43 percent, while spending on food and beverages and healthcare products has increased by 31 percent and 27 percent, respectively.
In selecting individual products in the store, lower- and higher-income shoppers are heavily influenced by promotional pricing and products for which they have a coupon. Higher-income shoppers are more likely to be influenced by past usage, television and print advertising, and recommendations from friends. Private Label Lower-income shoppers across the board are turning to private label products to save money; however, there are some nuances regarding private label attitudes. For instance, 29 percent of older lower-income households think name brands are worth the extra price versus 46 percent of African Americans, who appear to the be the most brand loyal micro segment.
In addition, 64 percent of younger households and households with children are willing to sacrifice quality to get a better price on a product versus 51 percent of older households. And, 70 percent of households with children will switch to another brand if it's cheaper versus 60 percent of African Americans. Needs, Wants and Satisfaction When selecting a grocery store, older shoppers are very focused on each component of the store's value proposition as well as store brand quality and helpful employees. For instance, 96 percent of older lower-income shoppers look for stores that offer good value for the money compared to 87 percent of Hispanic households and 86 percent of younger households. Interestingly, younger shoppers score lower on all criteria in selecting a store except for ethnic/specialty food variety, with 61 percent needing variety versus 48 percent of older households.
Looking at satisfaction levels across all micro segments, older households show the highest levels of satisfaction on nearly every criterion, while younger households indicate consistently lower levels of satisfaction, indicating opportunities for retailers. Health, Wellness and Lifestyle Fitting the diverse nature of lower-income households, their lifestyles and attitudes toward health vary broadly. For example, 76 percent of older households say eating healthy is important versus 65 percent of younger households. On the opposite end of the spectrum, only 41 percent of older households say projecting a good image is important versus 64 percent of African Americans and 62 percent of households with children.
When shopping for specific products, better-for-you attributes are important to all micro segments but with important variations. Older households are primarily focused on whole grains/high fiber as well as weight management attributes, while Hispanics place a higher relative importance on natural foods, super foods, and those enriched with protein.