CHICAGO – Lower-income shoppers in the United States will generate $84 billion in incremental spending during the next decade, making this the fastest growing income segment. These consumers (which include single-person households with annual incomes less than $20,000 or two-plus member households with incomes less than $35,000), represent an enormous opportunity for retailers and manufacturers during the slow economy -- if they understand that lower-income shoppers are not a homogenous group, according to research from Information Resources Inc.
"The Lower-Income II Report: Serving Budget-Constrained Shoppers in a Recessionary Environment" uncovers the critical differences and recessionary spending patterns and behaviors of lower-income micro segments that are driving today’s C.P.G. growth, IRI said.
"At this point in history, the lower-income shopper is continuously challenged to stretch each and every one of their dollars, which will continue for at least the next four-to-eight years," said Thom Blischok, IRI Consulting and Innovation president.
IRI studied five lower-income micro segments, which are positioned to drive a large share of sales growth for retailers and manufacturers during the challenging economy: Singles and married couples aged 25-34; seniors older than 65; households with children; Hispanics; and African Americans
During the third quarter of 2008, C.P.G. spending and private-label performance has improved, which is a trend being led by lower-income shoppers. However, most retailers are still missing the mark on their private-label offerings and marketing to lower-income shoppers, who represent the single largest private-label opportunity in the next five years. Progressive retailers can drive private-label growth if they focus on building stronger relationships with lower-income shoppers by improving variety and packaging.
Budget-constrained, lower-income shoppers are shopping more frequently compared with other income groups in today’s economy, but are spending less per trip. They are also aggressively shifting spending across channels, retailers, categories and brands.
Younger households and households with kids are driving growth across key food categories. For example, Hispanics have increased their spending on frozen dinners and cereals.
Manufacturers can also win a larger share of spending across lower-income segments by sharpening their focus on these groups and better understanding emerging trends and future implications for their categories and brands. The report provides direction for manufacturers on how to:
* Determine lower-income shopper share and growth performance
* Benchmark performance to calculate opportunity
* Identify opportunity gaps, such as "where/why are we getting less than our fair share?"
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