CHICAGO Even in a challenging and rapidly changing marketplace, lower-income shoppers will generate $115 billion in incremental spending during the next decade, the SymphonyIRI Group reported Monday in its fourth annual research report, “The Lower-Income Shopper Report: Serving Lower-Income/Multicultural Shopper Micro-Segments.” Yet, they are one of the most misunderstood, ethnically diverse and underserved shopper segments in the United States, SymphonyIRI added.
“Many retailers and manufacturers take a one-size-fits-all approach to reaching lower-income shoppers, but with a $115 billion opportunity at stake and increasing competition to win their share of wallet, a mass market view of these shoppers will not be enough to win their loyalty,” stated Sean Seitzinger, partner, Symphony Consulting at SymphonyIRI Group. “Only those retailers and manufacturers that embrace a micro-segmentation strategy to truly understand the needs and wants of these varied, nuanced and multicultural shopper groups will be able to serve them effectively and profitably.”
“The ‘Lower-Income Shopper Report’ exemplifies our continuing commitment to be industry leaders in providing actionable thought leadership to the [consumer packaged good] industry,” noted Krishnakumar Davey, managing director, Symphony Consulting at SymphonyIRI Group. “Specifically, this report will help the industry better understand the current and emerging needs of lower-income shoppers, so that retailers and manufacturers can tailor their offerings for the varied lower-income/multicultural microsegments.”
The “Lower-Income Shopper Report” is built on a four-year history of shopper behavior across five lower-income/multicultural segments — Hispanic households, African American households, young households ages 25 to 34 years, older/senior households ages 65 years and older, and households with children — and examined what is important to each group and what it will take to be successful in serving their changing needs.
Lower-income consumers frequently shop but generally spend less per trip than average, often shopping only with a paycheck or pocket cash. African-American lower-income consumers make the most retail shopping trips per year with 177 trips. Seniors make 169 trips, and Hispanics make 168. Lower-income households with children spend the most at $39.65 per trip, followed by younger households at $37.58.
Although lower- and higher-income shoppers both report careful trip planning, more than half routinely make unplanned purchases while in the store. At the same time, 49% of lower-income shoppers are much more likely to track their spending during the trip and make budget driven decisions on the fly, versus 38% of higher-income shoppers.
Over the past two years, half of lower-income shoppers report that they have decreased spending in discretionary areas, including home furnishings and furniture, in order to better afford essentials, such as food and health care. For example, spending on clothing and shoes has decreased by 43%, while spending on food and beverages and healthcare products has increased by 31% and 27%, respectively.
In selecting individual products in the store, lower- and higher-income shoppers are heavily influenced by promotional pricing and products for which they have a coupon. Higher-income shoppers more likely are to be influenced by past usage, TV and print advertising, and recommendations from friends.
Lower-income shoppers across the board are turning to private-label products to save money; however, there are some nuances regarding private-label attitudes. For instance, 29% of older lower-income households think name brands are worth the extra price versus 46% of African-Americans, who appear to the be the most brand loyal micro segment.
In addition, 64% of younger households and households with children are willing to sacrifice quality to get a better price on a product versus 51% of older households. And, 70% of households with children will switch to another brand if it’s cheaper versus 60% of African-Americans.
Fitting the diverse nature of lower-income households, their lifestyles and attitudes toward health vary broadly. For example, 76% of older households said eating healthy is important versus 65% of younger households. On the opposite end of the spectrum, only 41% of older households said projecting a good image is important, versus 64% of African-Americans and 62% of households with children.
When shopping for specific products, better-for-you attributes are important to all microsegments but with important variations. Older households are primarily focused on whole grains/high fiber and weight-management attributes, while Hispanics place a higher relative importance on natural foods, super foods and those enriched with protein.