Retail flat as consumers remain cautious

by Ron Sterk
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Experts describe the retail landscape as flat, as consumers slowly regain confidence in spending.

STOWE, VT. — The retail “landscape” has been nearly flat the past five years as consumers grapple with more bad news than good news, Todd Hale, senior vice-president of consumer and shopping insights for North America at Nielsen Co., said Aug. 5 at the International Sweetener Symposium.

“There’s a lot more bad news than good news,” Mr. Hale said. “Flat is kind of where we are right now.”

He noted reduced SNAP benefits, rising natural gas prices, lost extended unemployment benefits, low pay raises and 17% of homeowners still “deeply underwater” as factors contributing to slow retail sales growth. In the 52 weeks ended June 7, 2014, most growth was in convenience stores, at 2%, and value stores, at 1.2%, compared with drug stores, at 0.9% and supermarkets, at 0.8%, he said.

In the food sector, dollar sales of sugar and sugar substitutes have declined $64.2 million in the past four years, Mr. Hale said, although unit sales have been about flat. Retail dollar sales of granulated sugar were $1,495  million in the 52 weeks ended July 12, down 10% from 2010, brown sugar sales were $249 million, up 0.7%, and confectioners sugar sales were $141 million, down 2%, although unit sales of all three categories have held about steady during the four-year period. Dollar sales of sugar substitutes were $689 million in the latest 52-week period, down 6% over four years, with unit sales down 5%.

Dollar sales of gum, cereal and dairy desserts also have dropped over the past four years, Mr. Hale noted. At the same time, sales of snacks, candy, fresh produce, coffee, packaged meats, cheese, wine, beer and tobacco have increased.

Mr. Hale said growth in supermarket sales have been on the perimeter of the store for items perceived as fresh while sales of dry goods in the center of stores have tended to decline. There has been dollar sales growth in all fresh departments except seafood, he said.

Sales of private brands “took off” with the economic downturn in 2008, Mr. Hale said, but have been nearly flat since 2010.

Despite the slow overall retail growth, e-commerce, led by Amazon, has been the big winner with 12% annual growth compared to supermarkets at less than 4%, he said.

Consumers’ increasing focus on convenience is driving the rise in e-commerce, Mr. Hale said, with 20% of North Americans using on-line ordering for home delivery compared with 37% as the global average, with only grocery sales also on the rise. On-line grocery sales are expected to double in five key European countries by 2016, and also are growing in the United States with Walmart investing in on-line ordering and texting receipts to collect buying data and offer loyalty incentives.

The use of subscription services and low or free delivery charges show retailers’ willingness to capture consumer dollars amid growing competition, Mr. Hale said.
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