July 23, 2008
Grocers Didn’t Get Fair Share of Stimulus Checks
It was widely speculated that once the government’s tax rebate checks started coming in that consumers would spend the vast majority of those dollars on staples such as grocery items sold in supermarkets. That, according to a national survey of consumers conducted by ICOM Information & Communications of Precima, did not happen.
According to the survey, 84 percent said they did not spend their rebates to purchase groceries even though other data from the research suggests supermarkets had a real opportunity to capture more of those dollars.
Eighty-two percent said they’ve cooked at home more in the past six months instead of going out to restaurants;
Seventy-two percent have made fewer trips to buy groceries in the past six months;
Eighty-nine percent have shopped at the same grocery store for the past six months.
“The grocery industry didn’t convince the American consumer that maximum return on stimulus checks could be achieved right in the supermarket aisles,” said Brian Ross, general manager of Precima, in a press release. “The average family of four’s $1,800 rebate equates to about three months of grocery buying, a prime opportunity for stores to influence shopping behavior. The rebate checks were a missed opportunity for grocers as consumers in this economic environment opted to earmark the funds for other uses – paying down debt, spending on necessities like gasoline and utilities or putting into savings.”
Supermarket programs that offered consumers additional savings through gift cards or store credits were off the mark, said Mr. Ross.
“Supermarkets are sitting on a wealth of aggregate inventory, sales and customer data from frequent shopper programs. Instead of limiting their promotions to gift card offers, grocers could have used loyalty data to identify more relevant incentives for shoppers to spend their rebates at the grocery store,” he said.
Discussion Questions: How would you rate the effectiveness of grocery marketing efforts around the federal stimulus check program? What could supermarkets have done to more effectively address the opportunity?
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My partner Nikki Baird asked the most important question: Okay, what DID they spend it on?
Mind you, some early research that she did on the subject said the lion’s share was expected to go to Consumer Electronics, so there’s no surprise there.
I also wonder, do we really think there would have been a lot of value to people “pantry packing”? There’s only so much you can eat at a time, after all.
I’m inclined to agree with Charles. The projected $1800 family rebate was used to satisfy wants and needs of the family across a broad spectrum of products, not just food. That helps to explain why retailers such as Walmart achieved larger like-store sales than did Supervalu and food retailers. But, on balance, I also agree with David; food retailers did okay even if their glass looks half empty.
Grocers are guilty of thinking inside the box on this one, to assume that consumers will spend “found money” on something that is already in their monthly budget. Food is a staple for every American’s budget and doesn’t radically change in value or content from month to month or year to year without extreme inflation driven price increases or widespread supply issues. With this in mind, it should have been obvious to grocers that consumers would spend their rebate checks where their budgets needed them most.
An opportunity to pay down a credit card or increase savings is the most sensible approach to spending this check during recessionary times. A less sensible approach (but highly attractive) is to purchase big ticket items that their budget doesn’t normally allow, like a flat screen TV, a new set of tires, or major home renovations. These options provide ongoing returns during the year in the form of comfort and piece of mind.
What sense is made from purchasing $500 worth of groceries when you have a $100 grocery budget every week anyway? What do you do with the extra food (most Americans don’t have that much pantry space) and how do you avoid the short shelf life on anything but the basic canned goods?
Grocers should not be chasing the magic tax rebate to get consumers. The most successful grocery chains understand their consumers better than that. Successful grocers know that consumers will spend about the same amount each week on groceries and rarely are prompted to make big stock up purchases. These grocers are committed to the kind of customer service and low pricing that would encourage all of that budgeted grocery spending to occur within their store.
I’m not sure I believe any of what I’ve read here so far. The research by ICOM seems flawed in some respects. The percent of people not spending their checks on Groceries can’t be right. Most people get the money deposited in their bank account and then spend it on those “things they have been meaning to do/fix/get” but they still go to the grocer to get their items. How do we know if they didn’t spend a little extra this time on a few nice steaks or some other prime item? They won’t be able to tell us, really.
Plus, what did we expect the grocer’s to do to promote using the money there? Put out advertising promoting what? “Hey, got your check? Spend more here!” People still need to eat and wipe their buttocks, so grocers may not have reaped the benefits…but it didn’t hurt them.
Money has no memory. If people spent their government tax rebates on X, they have more money for Y. If they saved their tax rebate money, the bank lends it to someone else to spend. Grocers will get more of America’s income this year anyway, because food inflation is higher than recent past years.
I think grocers did a pretty good job in raking in the stimulus checks. In fact, many grocers learned that it might be a good idea to simply give consumers a $330 gift card for $300 at anytime regardless of they have stimulus check or not. With more consumers switching to those 5% cash back credit cards which the stores end up paying the fees, grocers find they are better off selling $330 gift cards for $300 rather than be nickel and dimed by the credit card companies. Grocers would rather sell a large gift card at a discount rather than have consumers come in making ten $30 trips and using their credit card. We all know that sometimes the value of those cards never gets used so it generates even more profit.
Maybe I don’t get around enough but I haven’t heard any of my clients complaining. Sure, grocers could have probably been more effective in some areas but overall I think it was a success.
Also, grocers who dropped the requirement of having a stimulus check to get a 10% bonus on a gift were able to reach more consumers. First, I would think most Americans now have direct deposit so cashing a stimulus check at the grocery store or any store was impossible. Second, only really poor taxpayers got the checks so not allowing higher income tax payers to share in the program would have been extremely unfair. Grocers and other retailers who discriminated against consumers who did not get a check, in my opinion made a mistake.
Grocers, and most retailers in general, did a pretty poor job of trying to capture the stimulus dollars.
Walmart on the other hand, as well as several notable exceptions, did realize that should they be successful in drawing the customers with their stimulus checks into their stores, that the windfall from this success would be significant. You may have noticed that Walmart posted a nearly 6% comp store increase last month and I have word that a good portion of it came from the stimulus check spending.
Supercenter merchants (and category killers) have a bit of an advantage in that the stimulus checks may be spent across an array of product categories from electronics to housewares, so spending all $600 to $1800 at one time is not a stretch. It is unlikely that a family is going to cash the stimulus check at the SuperValu and then spend the whole $1800 on food.
Grocers could have done a better job of luring these customers to their stores through offering incentives and perhaps bonus deals in order tap into this windfall.
The cry of American business seems to be: When times are tough, give me socialistic programs like stimulus packages…But when times are good, keep the government out of my business.
Or, as Alan Greenspan said on CNN the other day about Fannie Mae and Freddie Mack: The financial industry wants us to socialize capital when there are losses but to deregulate the industry when there are profits.
I’m thinking a good, strong recession might have to happen in order to correct the thinking in the U.S. in terms of how markets and government should work together–and how they shouldn’t.
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My partner Nikki Baird asked the most important question: Okay, what DID they spend it on?
Mind you, some early research that she did on the subject said the lion’s share was expected to go to Consumer Electronics, so there’s no surprise there.
I also wonder, do we really think there would have been a lot of value to people “pantry packing”? There’s only so much you can eat at a time, after all.
I’m inclined to agree with Charles. The projected $1800 family rebate was used to satisfy wants and needs of the family across a broad spectrum of products, not just food. That helps to explain why retailers such as Walmart achieved larger like-store sales than did Supervalu and food retailers. But, on balance, I also agree with David; food retailers did okay even if their glass looks half empty.
Grocers are guilty of thinking inside the box on this one, to assume that consumers will spend “found money” on something that is already in their monthly budget. Food is a staple for every American’s budget and doesn’t radically change in value or content from month to month or year to year without extreme inflation driven price increases or widespread supply issues. With this in mind, it should have been obvious to grocers that consumers would spend their rebate checks where their budgets needed them most.
An opportunity to pay down a credit card or increase savings is the most sensible approach to spending this check during recessionary times. A less sensible approach (but highly attractive) is to purchase big ticket items that their budget doesn’t normally allow, like a flat screen TV, a new set of tires, or major home renovations. These options provide ongoing returns during the year in the form of comfort and piece of mind.
What sense is made from purchasing $500 worth of groceries when you have a $100 grocery budget every week anyway? What do you do with the extra food (most Americans don’t have that much pantry space) and how do you avoid the short shelf life on anything but the basic canned goods?
Grocers should not be chasing the magic tax rebate to get consumers. The most successful grocery chains understand their consumers better than that. Successful grocers know that consumers will spend about the same amount each week on groceries and rarely are prompted to make big stock up purchases. These grocers are committed to the kind of customer service and low pricing that would encourage all of that budgeted grocery spending to occur within their store.
I’m not sure I believe any of what I’ve read here so far. The research by ICOM seems flawed in some respects. The percent of people not spending their checks on Groceries can’t be right. Most people get the money deposited in their bank account and then spend it on those “things they have been meaning to do/fix/get” but they still go to the grocer to get their items. How do we know if they didn’t spend a little extra this time on a few nice steaks or some other prime item? They won’t be able to tell us, really.
Plus, what did we expect the grocer’s to do to promote using the money there? Put out advertising promoting what? “Hey, got your check? Spend more here!” People still need to eat and wipe their buttocks, so grocers may not have reaped the benefits…but it didn’t hurt them.
Money has no memory. If people spent their government tax rebates on X, they have more money for Y. If they saved their tax rebate money, the bank lends it to someone else to spend. Grocers will get more of America’s income this year anyway, because food inflation is higher than recent past years.
I think grocers did a pretty good job in raking in the stimulus checks. In fact, many grocers learned that it might be a good idea to simply give consumers a $330 gift card for $300 at anytime regardless of they have stimulus check or not. With more consumers switching to those 5% cash back credit cards which the stores end up paying the fees, grocers find they are better off selling $330 gift cards for $300 rather than be nickel and dimed by the credit card companies. Grocers would rather sell a large gift card at a discount rather than have consumers come in making ten $30 trips and using their credit card. We all know that sometimes the value of those cards never gets used so it generates even more profit.
Maybe I don’t get around enough but I haven’t heard any of my clients complaining. Sure, grocers could have probably been more effective in some areas but overall I think it was a success.
Also, grocers who dropped the requirement of having a stimulus check to get a 10% bonus on a gift were able to reach more consumers. First, I would think most Americans now have direct deposit so cashing a stimulus check at the grocery store or any store was impossible. Second, only really poor taxpayers got the checks so not allowing higher income tax payers to share in the program would have been extremely unfair. Grocers and other retailers who discriminated against consumers who did not get a check, in my opinion made a mistake.
Grocers, and most retailers in general, did a pretty poor job of trying to capture the stimulus dollars.
Walmart on the other hand, as well as several notable exceptions, did realize that should they be successful in drawing the customers with their stimulus checks into their stores, that the windfall from this success would be significant. You may have noticed that Walmart posted a nearly 6% comp store increase last month and I have word that a good portion of it came from the stimulus check spending.
Supercenter merchants (and category killers) have a bit of an advantage in that the stimulus checks may be spent across an array of product categories from electronics to housewares, so spending all $600 to $1800 at one time is not a stretch. It is unlikely that a family is going to cash the stimulus check at the SuperValu and then spend the whole $1800 on food.
Grocers could have done a better job of luring these customers to their stores through offering incentives and perhaps bonus deals in order tap into this windfall.
The cry of American business seems to be: When times are tough, give me socialistic programs like stimulus packages…But when times are good, keep the government out of my business.
Or, as Alan Greenspan said on CNN the other day about Fannie Mae and Freddie Mack: The financial industry wants us to socialize capital when there are losses but to deregulate the industry when there are profits.
I’m thinking a good, strong recession might have to happen in order to correct the thinking in the U.S. in terms of how markets and government should work together–and how they shouldn’t.