The New Consumer (September-October 2022)
Findings from a recent report on inflation commissioned by Nielsen and Catalina’s joint venture NCSolutions (NCS), a purchase-based ad targeting and measurement firm serving the CPG industry, found that nearly half of U.S. consumers (45%) feel like they can’t afford their previous lifestyle and 76% said their family has changed how they buy food with prices on the rise. The report includes findings from a June consumer sentiment survey as well as proprietary NCS purchase data, which reflects the buying trends of consumers for CPG products.
Takeaways from the NCS report include:
• Six in 10 Americans believe CPG product packaging has gotten smaller but costs the same, compared to one year ago. Consumers still feel the strain of supply chain issues, as 69% said there are fewer items of the same product on the shelves.
• Fifty-three percent said they find basic food staples more expensive, and 40% believe a recession will occur in 2023. Seventy-one percent said the increased price of groceries is straining their savings. And 45% said increased prices in the grocery aisles mean seeking out less expensive brands.
• Other ways consumers are coping with the increased price of groceries are loading up the pantry (27%) or freezer (26%), or shopping closer to home (24%).
• When it comes to consumers’ preferred brands, 60% are seeking less expensive alternatives when their favorite brands reach a price beyond their budget. Forty-six percent plan to go without their favorite brands, and 43% look for sales to offset the cost.
• There was an almost 13% price increase on average over six years.
“For the second time in a little over two years, consumers are pivoting to new purchasing behaviors at the grocery store,” said Alan Miles, CEO, NCSolutions, in a news release about the survey results. “Since the start of the pandemic, they’ve been swapping their favorite brands for what’s available. Today, though, value is the centerpiece more often than availability, (and) consumers are selecting brands and products to stretch their budgets as far as possible. CPG brands that meet customers where they are both in this inflationary moment and as prices ease have the best shot at keeping them for the long term.”
Adjusting for Inflation
Quantum Metrics’ latest retail benchmarks report, “Adjusting for Inflation,” analyzed data from the software company’s clients as well as survey responses from 3,400 consumers in the U.S. and U.K. to identify how rising prices caused by inflation and concerns about a recession are causing consumers to rethink their shopping habits.
A key takeaway from the research indicates the shift from “spontaneous shopping culture,” driven by big-box stores and Amazon, to more planned purchases of multiple items in one checkout. Consumers are also putting more of an emphasis on value as money constraints remain top of mind. Other trends highlighted in the report include:
• Generic store brands are the new go-to. As costs climb, consumers are increasingly considering replacing name brands with generic items, particularly in the U.K., where two in three Brits will opt for generic or store-brand health and wellness items (69%) to cut costs. More than half in the U.S. and U.K. (55%) would even go generic for home goods such as furniture, sheets or appliances.
• Consumer technology purchases are taking a backseat. Unlike during the height of the COVID-19 pandemic when many consumers were upgrading their tech to work and study remotely, new and back-to-school tech (such as laptops or tablets) will make up less than 10% of consumer school supply budgets, while warranties, parts replacements and other accessory upgrades will likely see a boost.
• Checkout is evolving. Most consumers across the U.S. and U.K. are leaning into interest-free, buy-now-pay-later (BNPL) programs like Klarna to manage costs. There are already concerns that BNPL usage over the summer could have lasting effects on fall and holiday spending. Americans are looking to credit cards, as 39% plan to apply for new credit cards ahead of the holidays and more than half will reserve their credit card points or rewards to redeem for holiday gifts.
• Black Friday and Cyber Monday will be busy. Due to rising costs, four in five consumers (80%) already plan to shop Black Friday this year, and 57% of those who will shop the sales have either never done so before or have just a few times in the past. Despite storefronts being fully open, most sales traffic will still happen online, with 75% of consumers planning to do most of their shopping digitally.
Ad Spending Increases Across Channels
Recent research from Skai’s “Q2 2022 Digital Marketing Quarterly Trends” infographic, an in-depth analysis of the digital marketing trends that defined the second quarter, revealed that advertising spending increased across channels overall in the quarter, compared to previous quarter and 2021.
It also indicated that commerce ads across retail media and social channels showed robust growth, while paid search spending focused more on services than goods. Some other key takeaways from the Q2 research included:
1. Overall spending growth continues: Retail media growth accelerated 42% year-over-year (YOY) in Q2 as advertisers continued to increase spending both on Amazon and the growing number of other retail media networks. Paid social media spending growth grew 15%, as 2022 has proved a more stable spending environment than the same period in 2021. Paid search spending increased 11% YOY.
2. Shopping a big factor across channels: Retail media growth was driven by more brands trying to reach a larger group of shoppers while they are in-market. Paid social spending growth in the quarter also benefited from investment on commerce-focused ad types and advertisers. Only in paid search did investment follow the trend away from goods and toward services.
3. Social advertisers are adjusting to IDFA (Identifier for Advertisers — the random device identifier assigned by Apple to a user’s device): 2021 saw “sequential spending declines” from April to May to June as the release of iOS 14.5 introduced changes to privacy controls and availability of data for both targeting and measurement.
4. Responsive search ads dominate search spend: The migration of paid search from the expanded text ad (ETA) format to the responsive search ad (RSA) format has put RSA in the dominant position, comprising 38% of total Q2 spend compared to 23% in Q2 of 2021. ETA spend has dropped from 40% to 27% of spend over that same period, with shopping ads making up most of the balance.
Other key findings include:
• Commerce spending in social media was a major driver of overall investment, whether based on accounts or ad types, even outgrowing retail media both quarter-on-quarter and YOY.
• Ads for CPG products are proliferating on newer retailer media networks, including Instacart’s and Kroger’s.
• More sophisticated ad formats and bidd-ing strategies continue to drive growth as they replace legacy options.