Changing Retail Customers

Deanna Dewitt Caitlin Zimbrick Lauren Stewart

The faces of Change

“Changes in consumer attitudes and behavior are reshaping consumer shopping and spending patterns making today’s consumers more fragmented and harder to predict than ever before…”

• Fast-growing ethnic, age and income segments • Expected growth of four major demographic groups 1. Hispanic consumers 2. High-income consumers 3. Low-income consumers 4. Aging Baby Boomers • Tailor the product mix

Market segmentation

Method retailers use to examine ways to segment, or break down, heterogeneous consumer populations into smaller, homogeneous groups based on their characteristics.

– Who their customers are – How they think – What they do – Desires, needs, perceptions, and shopping behaviors Micromarketing: tailoring merchandise in each store to neighborhood preferences,

Ethnic market segmentation

“…today’s consumers are multicultural and bilingual…” • The "Hispanic ethnicity" category on the

Census includes:

– Mexicans (7.3 % of the total U.S. population –

in 2000)

– Puerto Ricans (1.2 percent)

Cubans (0.4 percent)

– other Latin and South American ethnicities. • 14% of U.S population in 2006 is Hispanic • Buying power of $652 billion in 2006 and

growing by 9% per year.

• Spend more on consumer goods than the

general population-mainly due to their greater household size

• Fastest growing demographic group in the

U.S

• Hispanic students represent 15% of the total

versus 11% in 1990

• Expected to triple in size by 2025 and

represent 29% of the U.S. population

“The Hispanic consumer”

“ It costs the average retailer five times as much money to get a new customer into its store as it does to retain a current customer who may be unhappy.” –Dunne & Lusch • • • • Shop in groups with their family rather than as a single shopper.

Price-conscious Look for three things when choosing where to shop: 1. Good prices (but not the lowest) 2. Proximity to their home 3. Whether the store sells ethnic foods Shopping patterns reflect needs of young and large families

How to reach the Hispanic consumer

• Look in specific categories to figure out where they are really spending their money • Hispanics spend the most in the following categories: – Children/infant clothing – Athletic shoes and clothing – Telephone services – groceries • Don’t ignore regional differences; the various countries of origin affect the consumer behavior and media usage • Tailor product mix – EX: Bilingual packaging with emphasis on Spanish – EX: Stronger and different scents – EX: Value pricing Examples of such products include • Procter & Gamble's Gain and Ariel detergents • Colgate-Palmolive's Suavitel fabric softener, and Clorox's Lavanda (lavender-scented) surface cleaners launched under a number of different brands.

Success 7-Eleven Gets store specific

• Tailor the product mix at each store to that store’s customers • Selling Enchilosa products (spicy “picante” noodles for the Hispanic market) in areas with large Hispanic population • Tailor products, food, magazines, and services to need of those customers.

• Item-by-item management • Customer needs drive product assortment and merchandising

Consumer Retailing for:

Low-income consumers High Income consumers

Low-income consumers

• Consumers who earn $25,000 or less annually • Nearly a third of Americans live on household incomes of less than $25,000

Low-income consumers spending patterns:

• spend a high share of their money on food and rent • Spend a large share on consumable goods: nonperishable food, toilet paper, cleaning supplies and shampoo • necessity rather than impulse that dictates their purchase behavior.

Who Targets low-income consumers?

• Convenience discounters like Family Dollar, Dollar General and the Dollar Tree serve the low-income consumers .

Meeting low-consumer needs

• low-income consumer do not buy because they want to but it is when they absolutely HAVE to.

• In order for low-income retailers to be successful they must be responsive to their consumers needs.

– Basic consumable goods

Store Characteristics

• These stores are generally smaller and older than stores serving moderate-income consumers and also offer fewer time-saving services.

• Lack sophisticated inventory control and worker training

High-income consumers

• Households with incomes of more than $75,000 • Allocate larger amounts of money to food away from home, housing operations, supplies and furnishings, entertainment, and apparel and services.

High-income consumers: Eating out

• Households with incomes of $75,000 or more allocated just over 11% of their total expenditures on food and 51% of that food was away from home • Increased visits to food categories that have higher priced items.

• Less likely to take advantage of deals

Recreational Shopping for high income consumers

• more shoppers today view it as recreation and entertainment.

• Shopping is now an experience people with high incomes pursue for fun, recreation, adventure and as well as a way to buy more stuff.

Shopping a unique and fun experience

• Niketown is a three-story shoe store that presents shoes and clothing in a highly entertaining way – Basketball courts – Pictures of sports heroes

High-income consumers: high quality products

• Demand high quality products and personalized services.

• Products tend to have more attributes and can be differentiated from other products.

Home-based shopping

• Catalogues • Online-shopping – Peapod: shop for groceries online, groceries delivered to home within 2 hours • No driving and more time saved • Less impulse buying

Consumer Retailing for:

Baby Boomers

Baby Boomers

• Born between 1946 and 1964 • Children of WWII veterans • 1 st wave of boomers turned 60 last year, entering the “gray market” • Newly disposable income due to children leaving home, retirement

As consumers…

• They have a fine taste for good quality and reasonably priced products • They look for products that will make their daily lives easier • They research products before deciding which are best to buy

Marketing

• The 18-49 demographic gets the most attention in advertising • Commercials:30% more per ad minute

BUT…

• Consumers ages 50+ already spend more than $1.7 trillion per year • 78 million baby boomers are richer than any group in history

Sunbeam

• Aims products toward “time stressed individuals” who have no time for gourmet cooking • Markets on TV, radio, and the web

KitchenAid

• Many housewares marketers are partnering with charitable causes • Raises awareness, aids in sale • 2001: Partnered with the Komen Breast Cancer Foundation • Partnership has become one of the greatest sources of revenue for Komen • 2006: Survivor’s Week

Bibliography

"Aging Hipsters Change Housewares Market." Response March 2007 41-45. 6 April 2007

Crain, Rance. "Boomer Boon: 'Crazy Aunts and Uncles' Spend $1.7 Trillion." Advertising Age. 02 April 2007. 6 Apr 2007

Gibson, Rowan. "Mapping The Future Marketplace." Winning in the Innovation Economy. 5 Apr 2007

Howell, Debbie. "The Leader In The Realm of Deep Discount." DSN Retailing Today 8 May 2000 6 April 2007

Longo, Don. "The Faces of Change." Convenience Store News. 3 March 2007. Buisness Source Premier. 5 Apr 2007 .