Lower-income Shoppers Represent Major Opportunity for Retailers: IRI

Lower-income shoppers are the fastest-growing income group in the United States, and will generate $84 billion in incremental spending during the next decade, according to the latest research from Information Resources, Inc. (IRI).

Indeed, research from the Chicago-based market intelligence firm contends that less affluent consumers represent an enormous opportunity for retailers and manufacturers during the slow economy -- if they understand that lower-income shoppers aren't a homogenous group.

"The Lower-Income II Report: Serving Budget-Constrained Shoppers in a Recessionary Environment," uncovers the critical differences and recessionary spending patterns and behaviors of lower-income micro-segments driving today's CPG growth.

The IRI report, which identifies five key lower-income micro-segments that will be responsible for many growth opportunities, also uncovers huge variations in shopping frequency and spending levels, as well as channel and category-level dynamics. In addition, the report further empowers retailers and manufacturers to better understand the key differences among lower-income households, so that they can use these insights to their competitive advantage in hopes of attracting and retaining lower-income household loyalty.

"Lower-income households are one of the hottest opportunities in the marketplace, and will provide real growth for those who want to truly learn about the various micro-segments and their changing behaviors due to the economy," said Thom Blishock, IRI's president of consulting and innovation. "Our latest research goes beyond the usual narrowly focused reviews and provides meaningful implications and action steps which retailers and manufacturers can use today to drive growth. At this point in history, the lower-income shopper is continuously challenged to stretch each and every one of their dollars, which will continue for at least the next four to eight years."

IRI studied five lower-income micro-segments, which are positioned to drive a large share of sales growth for retailers and manufacturers during the challenging economy: Singles and married couples aged 25-34, Seniors older than 65, Households with children, Hispanics and African-Americans.

For each micro-segment, the report delivers four-year trends of key performance indicators (KPIs), including category development, sales growth and household penetration across 60 food, beverage and nonfood categories. The IRI analysis provides insights into which categories are best positioned for growth, which are most vulnerable, and how retailers and manufacturers should respond.

During the third quarter of 2008, CPG spending and private label performance has improved, which is a trend being led by lower-income shoppers. However, most retailers are still missing the mark on their private label offerings and marketing to lower-income shoppers, who represent the single largest private label opportunity in the next five years. Progressive retailers can drive private label growth if they focus on building stronger relationships with lower-income shoppers by improving variety and packaging.

When compared with other income groups in today's economy, budget-constrained, lower-income shoppers are shopping more frequently, but are spending less per trip. They are also aggressively shifting spending across channels, retailers, categories and brands. In addition, younger households and households with kids are driving growth across key food categories. African-American and older household spending has increased notably in salty snacks and chocolate candy, and Hispanics have increased their spending on frozen dinners and cereals.

For more information about the report and to view the executive summary, visit http://us.infores.com/Insights/Reports/TheLowerIncomeIIReport/tabid/220/Default.aspx.
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