Consumers rediscover coupons
The humble coupon is back, in a big way.
Two years after the nation’s economy hit bottom in the most wrenching tailspin since the onset of the Great Depression, coupon use in the United States has staged a remarkable comeback.
Fueling the recent explosion in coupon redemptions is the Great Recession, which cut a huge hole in consumers’ budget for groceries, health and beauty items and everyday household needs, and a nimble coupon distribution industry that has fostered and exploited a massive rise in Internet-based coupon redemptions through personal computers and mobile devices.
“In 2010, marketers distributed more consumer packaged goods coupons than the prior year, reaching 332 billion,” noted NCH Marketing Services, a division of Valassis, in its Annual Topline U.S. CPG Coupon Facts Report. That marks a 6.8% increase over 2009, and “the largest single-year distribution quantity ever recorded in the United States,” NCH reported.
U.S. consumers redeemed 3.3 billion of those CPG coupons last year for a total savings of $3.7 billion. That’s a 5.7% increase from 2009, according to the research firm. “Consumer demand for coupons remained high in 2010 as shopping habits created during the most recent recessionary period sustained throughout the sluggish economic recovery that occurred during the year,” said Charlie Brown, NCH VP marketing. “In fact, [one]-third of the respondents in NCH’s Annual Consumer Survey said that they used more coupons in 2010 than the prior year.”
Retail experts agreed. “Coupon use has been increasing exponentially during the recession,” said David Fikes, director of consumer affairs for the Food Marketing Institute. “It leveled off a little bit over this past year, but it is continuing.”
“It’s like the trend of eating more meals at home,” Fikes told Drug Store News. “Some people are saying that even after the recession they’re going to continue doing that.” In addition, a younger generation has discovered coupons, “particularly with Internet couponing, which has taken off,” he said.
It’s a striking turnaround. Coupon use had been dropping precipitously for decades — from a peak of 4.6 billion coupons redeemed in 1999 to a nadir of just 2.6 billion per year during the three-year period ended in 2008, according to The Nielsen Co. But “the Great Recession of 2009 changed all that and marked a sort of renaissance for the coupon,” reported Todd Hale, SVP consumer and shopper insights for Nielsen.
The trend is likely to continue. “Fewer consumers are switching brands to catch a sale and trading down to private-label options, hinting at glimmers of optimism in a marketplace still marked by high levels of caution and frugality,” noted SymphonyIRI Group in its inaugural MarketPulse Survey report, unveiled March 30. “However, the number of consumers engaging in preplanning activities, such as coupon clipping and list making, remain virtually unchanged [from 2009] and are very much a part of consumers’ grocery shopping rituals.”
All signs point to a long-term shift in consumer behavior, said Susan Viamari, editor of Times & Trends for SymphonyIRI. “I think consumers, before the recession, were perhaps a little too carefree or free-spending. And now they’re saying, ‘We can save money relatively easily using coupons, and it’s not all that painful a process. So why would we want to abandon that just because the economy is a little better?”
The MarketPulse survey found that “just about half of consumers (47%) [said] they’re using more coupons today than they have in the past, which is consistent with 2009, when 49% said they were using more coupons than in the past,” Viamari told Drug Store News. “We also asked consumers … if they would continue to do so in the coming year, and just about everyone, more than 90%, said they will continue to do so in the coming year.”
A recent report from CouponSense.com also foresaw a long-term shift in consumer behavior. “Looking at 2011, a combination of the recession, [the] ‘Extreme Couponing’ reality show, new product labeling and a new general attitude in America that saving money is socially responsible, 2011 will be a record year” for coupon redemptions, the company noted.
ReportersNotebook — Over the Counter, 6/27/11
SUPPLIER NEWS — Carex Health Brands earlier this month announced the opening of its new corporate headquarters in Boston. The new East Coast headquarters supports the expansion of Carex’s marketing team, the company stated.
“With the move to Boston, we are ramping up our team of driven and creative marketing professionals to elevate Carex Health Brands to an entirely new level of growth and success,” noted Matt McElduff, Carex president.
U.S. News Media Group ealier this month ranked the best dieting plans, naming Weight Watchers the best “commercial” diet plan, as well as the best weight-loss diet overall. “In experts’ ratings, Weight Watchers bested all other ranked diets for both short-term and long-term weight loss,” U.S. News reported. Jenny Craig stood as the No. 2 commercial diet plan, and Unilever’s Slim-Fast brand was No. 3. A panel of 22 experts — including nutritionists, dietitians, cardiologists and diabetologists — reviewed the diet profiles and rated the diets.
Target’s five-step plan for success
MINNEAPOLIS — Target is poised to become an even more significant player in the world of health, wellness and beauty in the coming years, assuming the company can execute a range of initiatives designed to grow sales to $100 billion and double earnings per share to at least $8.
Those targets represent huge increases from last year’s sales of $67.4 billion and earnings of $4, but chairman, president and CEO Gregg Steinhafel believed the figures are attainable within six to seven years. Earlier this month at the company’s annual meeting, he laid out the roadmap of how the company plans to get there.
First, much of the increased sales volume is expected to be generated by the ongoing conversion of the company’s base of discount stores to a new format known as PFresh. The addition of fresh food and an expanded consumables offering is the primary point of difference with PFresh, but as long as Target is putting stores through the disruptive remodeling process, it is using the occasion to upgrade other key areas of the stores. The end result is a more compelling shopping experience and a product assortment that more broadly satisfies shoppers’ needs and increases the frequency of visit and average transaction size.
The PFresh program, coupled with an increased emphasis on beauty care and pharmacy, as evidenced by the company’s “Ask Us” pharmacy campaign, has driven sales results in the broad category the company defines as household essentials — pharmacy, beauty, personal care, baby care, cleaning and paper products — to account for 24% of the company’s annual sales, up from 22% two years ago.
Since the PFresh concept was developed in 2009, Target has been remodeling stores at a rapid pace, including 341 stores last year that gave it a year-end total of 462 stores in the PFresh format. The company’s plans call for another 350 units to be remodeled this year, and at the end of the first quarter, 98 of those remodels were completed. Now 550 of the company’s roughly 1,500 conventional discount stores have been converted, and additional conversions will take place in the coming years.
But before that happens, Target has a major relaunch planned for its e-commerce business later this year that includes a heavy emphasis on mobile. “Our new site will offer an integrated and engaging online shopping experience. It will also give us a powerful platform for future multichannel initiatives that are authentically Target and relevant to our guests’ lives,” Steinhafel told attendees at the annual meeting. “This will significantly strengthen our ability to deliver a simple, differentiated brand experience that guests can access anytime, anywhere via a variety of channels.”
Looking ahead to the following year, another growth initiative outlined by Steinhafel involves the opening of the first City Target stores in Seattle, Los Angeles, Chicago and San Francisco. These stores are expected to produce useful insights around urban operational challenges and desired product assortments prior to what is expected to be a more meaningful rate of expansion in subsequent years.
Simultaneous with the PFresh remodeling activity and the major online push, Target is counting on a program called REDcard Rewards to contribute to same-store sales growth. Launched last fall, the program offers an immediate 5% discount to shoppers who pay with a Target credit or debit card. It quickly has gained acceptance and now stands at about a 7% penetration rate — and it puts Target at price parity with Walmart.
The biggest boost to Target’s topline will occur in 2013 when the company opens its first stores in Canada. The retailer acquired 220 Zellers leases, and after some extensive remodeling work, is due to open between 100 and 150 locations in Canada in 2013.
Target, along with all other retailers, is dealing with some major short-term challenges related to the economy and consumers’ ability to spend. However, Steinhafel is convinced a commitment to the company’s “expect more, pay less” value proposition will see it through difficult times.