🎯Shifting Consumer Habits in the US: A Closer Look

#HTE 269 - Walmart Reports 23% Global E-Commerce Sales Surge and much more!

February 24, 2024 • Estimated Reading Time: 12 minutes

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Welcome to HTE’s newsletter! 

In the dynamic landscape of US consumer habits, understanding trends is key. In this edition, we're diving deep into how people's preferences are shifting. From small changes to big ones, we're uncovering the reasons behind these shifts that shape the market.

But that's not all – get ready as we reveal five powerful strategies to help CPG companies deal with fewer sales. See how businesses are adapting with smart ideas and creativity.

And get ready for an exciting ride as we explore how Walmart is winning online. We'll break down how they're dominating the digital world and growing like never before.

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Shifting Consumer Habits In The US: A Closer Look

Five Strategies Can Help CPG Players Combat Volume Declines

Walmart’s E-Commerce Strategy And Growth

Brand Of The Week🎯

Top Reads📚

Hte Job Board- Get Your Dream Job With A Click✨💼

Shifting Consumer Habits in the US: A Closer Look

US consumers are shifting their shopping habits, opting for quality over quantity across various product categories, a trend that holds significant implications for consumer-packaged-goods (CPG) companies. Despite a robust economy and low unemployment rates, there's a noticeable decrease in the volume of goods purchased, contrasting with the surge seen in the initial stages of the COVID-19 outbreak.

Volume Declines Across Categories:

The decline in CPG volume spans multiple sectors, from groceries to personal care and household items. On average, US CPG volume has dipped by 2 to 4 percent, with certain subcategories like vitamins and supplements experiencing even steeper declines of 5 percent compared to 2022 figures. Even during the holiday season, there was no respite, with grocery volume dropping by 2 percent in November and December 2023 compared to the previous year.

This downward trend persists despite consumers increasing their shopping frequency across various channels and product categories, presenting a challenging landscape for CPG brands to navigate.

Changing Consumer Behavior:

Delving into the specifics, consumer behavior is undergoing subtle yet meaningful shifts. While purchase occasions remain steady or have increased in frequency compared to 2022, the number of items purchased per trip has decreased by 3 to 5 percent across grocery, health beauty, and household categories. Notably, Gen Z consumers buck the trend, showing a 10 percent increase in purchase occasions for groceries and health and beauty products in 2023 compared to the previous year, albeit with slightly fewer items purchased per occasion.

Shift in Sales Channels:

Analysis across five consumer goods categories and sales channels reveals a redirection of consumer spending away from traditional brick-and-mortar outlets toward online and value channels. Despite gains in online and select value channels, the volume losses in brick-and-mortar outlets outweigh these gains.

However, amid the overall downturn, there are pockets of resilience, particularly in online sales which have consistently grown by more than 4 percent. Gen Z consumers, in particular, exhibit a pronounced shift towards online purchasing, with their online unit sales increasing at nearly double the rate of other generations.

Impact of Increased Prices:

The primary driver behind the decline in consumer goods volume appears to be increased prices. Consumers cite product price hikes as a significant factor influencing their purchasing decisions across various categories, including grocery, personal care, and household products. Additionally, strategies such as waiting for items to go on sale before making purchases contribute to the volume decline. Stockpiling in 2022 also leads to reduced purchases in subsequent years, particularly among baby boomers.

Overall, consumers are reevaluating their purchasing habits, prioritizing essential items over discretionary purchases, a sentiment that is reflected across different age demographics. As consumers adapt to changing economic conditions, CPG companies must pivot their strategies to align with evolving consumer preferences and behaviors in 2024 and beyond. 🛒💼📉

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Five Strategies Can Help CPG Players Combat Volume Declines

Amidst persistent challenges such as above-average inflation, geopolitical tensions, and uncertain interest rates, consumer purchasing behavior remains subdued, leading to volume declines for CPG players. However, proactive measures can help executives navigate these turbulent times effectively. Here are five strategies to consider:

  1. Portfolio Evaluation: In response to evolving consumer preferences, it's crucial to assess the portfolio thoroughly. This involves identifying and capitalizing on areas of opportunity while considering exiting segments that no longer align with current demand. Whether expanding offerings in high-demand categories like health and wellness or optimizing product assortment, adaptability is key. 🔄📊

  1. Channel Expansion: Embracing growing channels, particularly online and value channels, can unlock new avenues for growth. Tailoring products to suit these channels, perhaps through unique packaging or sizing, can enhance market penetration. Additionally, investing in the digital shelf experience can enhance visibility and accessibility to consumers. 🛒💻

  1. Dynamic Pricing and Promotion: Given consumer sensitivity to price, revisiting pricing and promotional strategies is imperative. While cost pressures persist, strategic pricing adjustments can help maintain margins without compromising competitiveness. Furthermore, crafting value-driven promotions can incentivize purchases and foster consumer loyalty. 💰🎁

  1. Brand Investment: Despite the allure of performance marketing, nurturing brand loyalty remains paramount. Balancing brand-building efforts with performance-driven initiatives ensures a holistic approach to consumer engagement. By cultivating emotional connections and fostering brand advocacy, companies can influence purchase decisions even in uncertain times. 🏷️🔍

  1. Supply Chain Optimization: With fluctuating demand dynamics, optimizing the supply chain for agility is essential. Leveraging advanced analytics and AI technologies can enable real-time demand forecasting and inventory management. By streamlining operations and eliminating redundancies, companies can respond swiftly to changing market conditions. 🛠️📈

As economic uncertainty gradually wanes and consumer confidence rebounds, proactive adaptation to current realities is essential for long-term success. By implementing these strategies, CPG players can not only weather the storm but also position themselves for sustained growth in the future. 🌟🚀

Walmart’s E-commerce Strategy and Growth

Walmart's e-commerce division has surged ahead amidst turbulent times, boasting a remarkable 23% global sales growth, with a notable 17% spike in the U.S. market alone for the last quarter. The driving force behind this surge? Primarily, the retailer attributes its success to the widespread adoption of delivery and pickup services, illustrating a keen responsiveness to evolving consumer preferences.

Expanding Membership Benefits and AI Integration: Key Strategies

However, the narrative of Walmart's triumph in the digital sphere extends beyond mere convenience. Delving into a comprehensive E-commerce Index reveals a multi-faceted strategy underpinning Walmart's online dominance. Notably, the retail giant has augmented its arsenal with innovative tactics such as fortifying its paid membership program and integrating cutting-edge AI technology into its search engine.

Walmart's membership initiative, epitomized by Walmart Plus, has been a pivotal factor in its online expansion. Building upon last year's collaboration with Paramount+ streaming services, the company has further sweetened the deal by introducing exclusive perks. These include early access to coveted promotional events like Black Friday deals and the creation of its own retail extravaganza, Walmart Plus Weekend, strategically positioned to rival Amazon's Prime Day.

Questions: What are strategies that retailers can use to increase e-commerce growth? Where should retailers focus during times of financial uncertainty?

Answers From Research:

Equally significant is Walmart's investment in AI technology, forged through a strategic partnership with tech juggernaut Microsoft. By infusing generative AI into its search functionalities, Walmart revolutionizes the digital shopping experience. Customers are empowered to articulate their needs in natural language, transcending conventional keyword-based searches. For instance, instead of hunting down individual items like "unicorn decorations" and "plates," shoppers can simply express desires like "Help me plan a unicorn-themed party," streamlining the path to purchase.

In essence, Walmart's relentless pursuit of innovation in the digital sphere underscores the importance of adaptability and foresight in navigating uncertain economic landscapes. By prioritizing customer-centric strategies and leveraging cutting-edge technology, retailers can not only weather the storm but emerge stronger and more resilient in an ever-evolving market.

Brand of the Week ✨

Skinnydipped

SkinnyDipped was born out of love and loss, founded by Breezy and Val, who were inspired by their dear friend Josh Dickerson's radiant spirit. In 2012, Josh's passing compelled them to prioritize family and togetherness, leading them to start a business centered around their shared passions: food, love, and friendship. From humble beginnings on their kitchen table, they poured their hearts into perfecting SkinnyDipped almonds, creating snacks that are both delicious and nutritious. 🌰 

Through their journey, they've remained dedicated to spreading happiness and health, believing that everyone deserves access to wholesome food. As a women-founded company, they're committed to uplifting women and children worldwide, ensuring that no one goes without love or nourishment. 💖🌍 With each bite of SkinnyDipped, they aim to leave the world a happier, healthier place.

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