Lower-income shoppers and private labels

Lower-income shoppers are the fastest-growing income group in the United States and will generate US$84 billion in incremental spending during the next decade. The latest research from Information Resources, Inc (IRI) reveals that these consumers represent an enormous opportunity for retailers and manufacturers during the slow economy, if they understand that lower-income shoppers are not a homogenous group. 'The Lower-Income II Report: Serving Budget-Constrained Shoppers in a Recessionary Environment' uncovers the critical differences and recessionary spending patterns and behaviours of lower-income micro segments that are driving today’s CPG growth.

The report identifies five key lower-income micro segments that will be responsible for many growth opportunities and uncovers huge variations in shopping frequency and spending levels as well as channel and category-level dynamics. The report empowers retailers and manufacturers to better understand the key differences among lower-income households, so that they can use these valuable insights to their competitive advantage in the hopes of attracting and retaining lower-income household loyalty.

“Lower-income households are one of the hottest opportunities in the marketplace and will provide real growth for those who want to truly learn about the various micro-segments and their changing behaviours due to the economy,” says IRI Consulting and Innovation President Thom Blischok. “Our latest research goes beyond the usual narrowly focused reviews and provides meaningful implications and action steps which retailers and manufacturers can use today to drive growth. 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.”

Lower-income micro segments

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
• African Americans

Shopping and spending trends

During the third quarter of 2008, CPG 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.

Compared with other income groups in today’s economy, budget-constrained, lower-income shoppers are shopping more frequently, but are spending less per trip. They are also aggressively shifting spending across channels, retailers, categories and brands.

In addition, younger households and households with children are driving growth across key food categories. African–American and older household spending has increased notably in salty snacks and chocolate candy, and Hispanics have increased their spending on frozen dinners and cereals.

Manufacturers can 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.