Commentary

Five Kinds of Retailers Spreading CPG Sales Around

Todd Hale, Senior Vice President, Consumer & Shopper Insights, and Dan Brady, Director, Insights Consulting, The Nielsen Company, have summarized new research from Nielsen showing that multichannel shoppers spend significantly more money than single-channel shoppers in many consumer product goods verticals.  

Multichannel CPG shoppers have buying rates four to five times that of single-channel shoppers. For example, the average pet food shopper who uses four-plus channel spends $291 in a year, compared to $68 for the average single-channel pet food shopper.

Life used to be much simpler, notes the report. The local drug store was the natural destination for cough syrup, and cereal and frozen meals were bought at a grocery store.  Today, shoppers can take their pick of the number of locations they can find these or most any items. And while one-stop shopping is certainly a benefit for many consumers, Nielsen's research shows that across 15 major categories from snacks and carbonated beverages to paper products and pet food, shoppers take advantage of the wide array of choices available to them.

Multi-Channel Purchasers by Product Category

 

% of Buyers

Product Category

1Channel Exclusively

2Channels

3Channels

4+Channels

Paper products

17%

31%

30%

23%

Snacks

18

32

29

21

Carbonated beverages

28

34

24

14

Detergents

33

38

21

8

Oral hygiene

34

37

20

8

Cereal

34

40

20

6

Pet food

35

34

22

9

Juice/drinks

36

38

19

7

Hair care

41

34

18

7

Frozen prepared foods

42

42

14

2

Cough & cold

47

34

15

5

Vitamins

48

34

14

4

Coffee

50

34

13

3

Disposable diapers

52

28

15

5

Source: The Nielsen Company, November 2010

Paper products is one of the most fragmented categories of the 15 examined. 83% of category buying households shopped two or more channels in 2009 for paper towels, toilet tissue, facial tissue and other paper goods. Conversely, about half of disposable diapers, coffee, vitamins and cough and cold purchases come from shoppers who shop for those categories exclusively in one channel.

On a dollar basis, the importance of dual and multi-channel category buyers is even more pronounced. For example, almost two-thirds (63%) of paper products category sales went to households who purchased them in three or more channels. In all categories examined, the majority of category sales come from households who buy in two or more retail channels. And all categories have significant sales from three or more channel buyers.

The average oral hygiene product shopper, using four-plus channels, spends $62 in a year, about three times the $20 spent by the average single-channel shopper in this category. In the cough/cold category, where multichannel shoppers spend an average of $106 annually, more than five times the average $19 spent by single-channel cold/cough product shoppers.

Annual Buying Rate ($ Spent Per Year)

 

Shopping Locations

Product Category

Single Channel Exclusively

4+ Channels

Oral hygiene

20$

62%

Cookies

23

62

Hair care

19

76

Detergents

35

84

Coffee

32

96

Cough & cold

19

106

Juice/drinks

35

117

Cereal

52

122

Snacks

59

148

Paper products

67

159

Vitamins

40

190

Frozen prepared foods

83

207

Carbonated beverages

62

218

Disposable diapers

54

271

Pet food

68

291

Source: The Nielsen Company, November 2010

Whether consumers opt to shop multiple retail channels for convenience or value reasons, the implication is clear, concludes the report. Competition comes not just from the rival store on the next corner, but also from the big box store across town or from formats close to where shoppers work or travel.

A look at two specific categories illustrates the impact multi-channel buyers can have within a category as well as paint a picture of the competitive framework for retailers within a given retail channel.

For the year ending September 11, 2010, grocery is the clear choice for most peanut butter buyers as 77% of buyers purchase peanut butter either exclusively in grocery or in a combination of grocery and some other retail channel(s). Mass and grocery buyers represent the second largest individual buyer group,  followed by mass only. For non-grocers, the clear target is to take peanut butter sales from grocers, says the report.

Channel Choice (% of Peanut Butter HH Buyers)

Channel

% of HH Buying

Grocery only

46%

Grocery + Club

4

Grocery + Other

4

Grocery + Mass

16

Grocery + Dollar

1

Dollar only

1

Club only

5

Mass only

13

Other & other combos

10

Source: The Nielsen Company, November 2010

In contrast, the channel overlap for toilet tissue is extremely fragmented. Mass merchandisers and grocery stores capture the largest portion of buyers, either exclusively or in combinations with other channels. Grocery stores are the exclusive destination for 19% of category buyers, followed by a combination of grocery and mass merchandiser buyers (16%) and exclusive mass merchandiser buyers (12%).  Grocery sees all but 35% of toilet paper buyers.

For retailers, the report concludes by noting that some grocers have linked total store purchasing with savings on gas purchases to create continuity-based approaches to drive shopper spending and loyalty. Warehouse club retailers use similar tactics against their membership file, while dollar stores and mass merchandisers continue to leverage value pricing.

For manufacturers, maintaining broad distribution is vital. The study suggests that, for many types of categories, limitation to just one or two channels is a missed selling opportunity. And, in lieu of just selling the same products to all retail partners, some manufacturers are creating unique channel or retailer specific product assortment to create points of differentiation for their retail partners.

For more about the study, please visit Nielsen here.

1 comment about "Five Kinds of Retailers Spreading CPG Sales Around".
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  1. Michael Harper from Razorfish, November 12, 2010 at 9:34 a.m.

    I come to a different conclusion... that an increased number of channels doesn't fragment consumer dollars, it creates more of them. So stop fighting so much for your piece of the pie, give consumers more choice and the pie will get bigger.

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