• by Jack Loechner , Staff Writer @mp_research, November 11, 2010

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.