In this episode:
WSL’s Wendy Liebmann, CEO, and Candace Corlett, President, discuss how shoppers are dealing with spiraling price increases, how this moment is different from 2008, and how companies need to respond. They preview WSL’s upcoming Wellness study (The New Wellness Frontier). And the baseball season. (Yes, really!)
- WSL’s latest research on shoppers’ responses to inflation; how categories and retailers are being impacted based on new choices and trade-offs shoppers are making, and issues surrounding premiumization
- How this is different from the global economic crisis in 2008 (for those who can remember)
- What retailers and brands need to know, and do, in order to respond appropriately — in 2022 terms, and not necessarily using tools they did two decades ago.
- WSL’s upcoming research, The Next Wellness Frontier, and opine over the current baseball season (you may be surprised at what you learn on both topics)
Don’t miss upcoming episodes, stay up-to-date by visiting the WSL Shopper Insights Library, or our Podcast page.
Hello everyone. I’m Wendy Liebmann, the CEO and chief shopper at WSL Strategic Retail, and this is Future Shop. Today I’m here with my business partner dear friend and partner in all things shopper WSL President Candace Corlett. For those of you who don’t realize the wealth of her experience, she runs all our proprietary How America Shops® Research, How The World Shops Research, amongst many other things, including running me to make sure I stay focused. How are you, Ms. Candace? Nice to have you.
I am very well today Wendy and very glad to be with you. And will try hard to manage you during this podcast.
Thank you. So here’s another thing people don’t know, they do know that I’m hard to manage. But what they don’t know about us is that we are both big baseball fans. And I think that it’s only fair since you got annoyed with me the other day because they didn’t recognize that the Mets swept the Yankees. Please note every one we support opposing teams. But since I didn’t recognize that the Mets swept the Yankees and the Yankees are over client and the Mets are doing very well that I should at least make that nod publicly. So everybody Candace and I, baseball fans with a slight level of competition.
Yes. And I was just listening to the game. They’re sweeping another one very un-Mets. It’s very exciting and will enjoy this summer. You got to believe if you’re a Mets fan, you got to believe because that’s all you got going for you is believing.
Well, that’s well. Aside from that. Okay, so let’s get on to things that are on everybody’s minds. Aside from who’s going to win the baseball, what’s on everybody’s mind seems to be inflation still. Where are we on this journey of inflation? What are the shoppers telling us now in our latest How America Shops® research,
Inflation translates to rising prices for groceries for clothes for basic necessities, of course, then there’s gasoline, which is a whole other manifestation of inflation. But a lot of people we are discovering are able to absorb the rising prices, we’re only seeing about 40% of people saying they are really struggling having to make significant cuts in what they buy, in order to pay for the basic things like electricity and rent. 60% of the population is being cautious, but they’re not really impacted yet.
So as I think about what you just said, 40% are being severely or seriously impacted. Now we can talk about where and what people are cutting back on, but of the 60% who aren’t that sentiment that says ‘yeah, I’m not but…’ how do we reflect on that the impact of sentiment on people? You know, I don’t want to spend too much I want to be smart. How are we seeing that reflected in the conversations we’re hearing?
Where it seems to be reflected most is in pulling back on traveling around in the car, we are not seeing many people say they have to cut their spending in core categories like hair care, skin care, beer, seltzer coffee, but we are seeing people say, you know, I think twice before I get in the car and go away for the weekend or go visiting people. It’s almost like we’ve been pulled back into a COVID isolation.
Now I do think about that in the context too of, okay, well, I’m not getting in the car to go away… does that also mean I’m not getting in the car to make that one off trip? So I was going to go and hang out or you know, go to Costco or go to Target or go to the mall. But actually, I’m thinking twice about that, or is that kind of a manageable, affordable trip and I can rationalize that versus let’s all the family get in the car and go to the beach for the weekend.
And for many people that’s you know, a pretty quick trip relatively short distance, but getting in the car and going to visit people two hours away. That’s a whole other consideration and a whole other budget item. You said something important percentages tend to mask the impact, 40% of American households is millions of households that are struggling, and I’m intrigued by what they’re doing. I mean they’re flocking back to of course Walmart, which is usually seen as a hard shop you know it takes a lot of work, but they’re going there because they have to do the work for the low prices. They are flocking to Aldi, Lidl, Trader Joe’s, Five Below as well as Dollar General and Family Dollar.
You talked a bit about categories and I was interested to think about we have the longevity to look back at something like 2008, 2007-08, where we have the global recession and the impact there, versus here we are today coming out of two, three years of COVID and struggling with inflation rising prices. So what’s the difference there? I mean, you and the research team did some, some really fascinating work to go back and look at 2008, which many of our clients never experienced 14 years ago. So what are you seeing there?
The differences are so dramatic. And so always the social environment. 2008 was what our Research Director called a long slog to a crisis. We’ve been so battered by the unexpected September 11, in 2001, that tsunami in Japan, that wiped out cities, I mean, now we’re used to natural disasters, forest fires, floods, fires in places where fires should never be like Colorado, we’re now almost numb to that. But back in 2008, that was big news. And then, you know, you had the housing crisis, where people had signed on for homes that they really couldn’t afford, they signed on for variable mortgages that as soon as they switched over to fixed raise the price of your monthly payment by $200 – $300. And there was a universal impact from all that. And then, of course, the financial companies that held stocks, and the stocks for people’s pension plans were struggling or going belly up. So it was a time when everybody was affected. We had 80% of people saying, I can’t control gas prices, or my mortgage payments, so I have to cut back on everything else I spend on. It was 80% of everybody and 70% of people with incomes over 100k. And in 2008 $100,000 income was a significant income. And then you’re looking at today, we only have 37% of people saying I have to cut back because I can’t afford it all. And only 22% of the affluent. The impact in 2008 was just everybody was feeling it. And everybody was scared. And today, it’s been almost a whiplash. We started with COVID, the pandemic, the social injustices, the social riots, then the soaring gas prices and inflation. And it’s all been within two and a half years, when you mentioned categories, I mean, in 2008, we had 70% of people cutting back on something like home fragrance, a relatively small expense, but part of what made your house happy. And now we only have 30%, cutting back on that when 2008 we had 42% of people saying I have to cut back on my OTC medications. And they did that by buying less expensive forms, by taking fewer pills. Today, it’s only 14%. I don’t know how long this inflation will go on, or if it will just be a permanent correction. But it was much scarier in 2008. And it had much bigger impact on every category.
I think the other piece two is the almost the elevator drop in 2020. Even in the early stages of COVID. Right, the market was growing dramatically. So if you had stocks and financial reserves, then there was the money that came in from the government. So there were a lot of other issues there. It strikes me as I think about our clients, you know, manufacturers retailers, who are sitting there saying, Okay, now what, and those who either have a reference to 2008, certainly a lot of people in senior management, and those who do not, who are perhaps younger executives who do not have that point of reference thinking this is the end of the world, those issues as we think about it, let’s say from the CPG side. Now, what do I have to do about that? How do I have to think about that? In a world that’s so digital, where people are shopping in so many more places? What will that do to the landscape? So if I’m in health, or beauty, or food or beverages, pets, all of those areas that we work in? What are the one or two things we need to be telling our clients and everybody else that’s listening? What should they be concerned about? Or what should they do?
They certainly should be focusing on only 37% of people are cutting back but everybody else is thinking about how long is this going to go on? And how long am I going to be able to keep paying for eggs and milk and bread at these exorbitant prices? So I think that as we learned once before your strategy has to be, how am I going to keep people in the brand? The brand strategy has always been to upgrade the form to add more intriguing ingredients and charge higher prices. We may want to put that strategy on the shelf for a couple of years and think about how do I make the plain vanilla version? How do I make that more attractive, more affordable, and promote that because people are just they’re on alert?
Well, that whole trend around premiumization have so many things, right? Whether it was ice cream, or whether it was foundation, I heard that at a client meeting when I presented to their national sales meeting a few weeks ago, and they were talking about all the premiumization they done, they were about to go to the second round of price increases and how they were all going to deal with the retailers. And all of that is that horse out of the barn or whatever that expression is, because now I as a shopper have become used to that kind of quality, but I’m not going to be foolish about my spending. So now I have to step back and say, well, maybe I will squeeze that tube one more time, or I’ll use a cheaper equivalent, the private brand or trade down? Or is this about new innovative ways of creating value?
premiumization, to me is just another way of saying let’s create value around more premium ingredients. We’ve become very good at that. And shoppers have become very good at saying oh, that’s an added value. You know, it’s a pure form of collagen. But now it’s going to be different. Now people are going to be saying, can I really afford that pure form of collagen?
Or do I care enough? Right?
I think it’s raising awareness about how willingly we were to spend an extra dollar an extra $2. And can I take the just the regular tablet instead of a gel cap? Can I take the 12 hour instead of the 24 hour how we keep people in the brand by acknowledging that they want less expensive choices, and premiumization is going to have to wait for Ryan.
I also wonder about the other things that have been costing people more we’ve talked a lot about issues around sustainability, and organic and free from in lots of different categories. We would see in our data, this willingness to pay more for that the willingness to pay. And even it was a little bit more the willingness to pay a little bit more for more sustainable options, the willingness to pay a little bit more for more convenient options. Do we now have to as companies reassess that as well and say, listen, in good times, people were willing to do that. But now people still want that. But they’re not going to be willing to pay the kind of premium we might have been asking for.
That’s exactly right. And when you are faced with the harsh reality, in one category it makes you aware and others if you look at produce, we were all determined to buy organic apples and berries. Well now organic apples and berries are $8.99 a pound compared to the tainted versions that are $4.99 a pound. And can I really afford to pay that much more, especially when I have three children who were eating berries like popping m&ms? It’s expensive.
Yeah, I noticed that the other day because some of my benchmarks are things like organic milk, and I looked at the price, even the store brand of organic milk, and was like ‘Oh my heavens, that’s expensive.’
And then that raises your awareness and other categories.
The other thing I think about here is the kinds of choices not just within those categories, but it feels like we just got went to go out to dinner. And now oops, maybe we can’t afford to go out to dinner as often we just took our masks off and put our lipstick on… those kind of choices that to me are framed up in a lot of things we said in our Future Shop study, where we said there’s this sort of duality going on, on the one hand, lack of certainty, lack of surety, and on the other, I just want my life back, I want some control. So within that the choices, the little treats that people are willing to pay for, versus, you know, I’m cutting back on it. And understanding what that really means becomes a much more nuanced approach to marketing it feels to me and to category management, and to how we’re talking to our retailers about how they merchandise how they promote not just thinking about the choices within the aisle within the category, but also that broader macro choice of am I going to even bother about that category for a while because I really want to take control of my life and get a lot of enjoyment in another category. It’s not really a question, but it’s just me positing.
As we’re positing. The one aspect of spending that we haven’t touched on is convenience. And that is something that people are not willing to give up. And you can see that in everything from the bagged salads, and you can rationalize that it’s smarter to buy the bag because all the other things don’t go to waste but the bag salads, the getting in and out of the store quickly curbside pickup, which is now a $5 fee, whether you’re going to ShopRite, or Target, there’s a fee for someone walking around and picking your groceries, all of those things that make our life easier and take the stress out of it. That’s what people are still going to be willing to pay for. They’re going to be willing to pay for time.
That actually to your earlier point is this whole conversation about if I look at the entire shopper put the whole shopper in the room, as we always say that I think about that as a value proposition. I’m juggling, sometimes home at work, sometimes office work, the kids, life, all of those elements. And actually, even though I’m paying whatever that premium might be that in fact, in my calculation is worth it. Because it’s saving me on X, Y, and Z. So I do think, as our clients, manufacturers and retailers talk about or consider what is the value, they have to think in that broader sort of shopper ecosystem of what those trade offs look like not assume, but also understand the nuances of all of that.
Well, and that’s right, and it’s outside your brand.
Right, exactly. That’s why I hate category management is that a bad thing to say?
No, it’s outside of the category, it’s outside the brand. It’s about people saying, I will pay the extra $5 to have my groceries picked. But I’m going to buy the least expensive item in the skincare brand I like and I’m going to buy the least expensive version of the pasta sauce that I like, I’ll forego the fancy and I’ll forego the organic but I have to make it convenient.
I do recall in 2008, one of the discussions we had is was trading things off in the equivalent of okay, a magazine is $4, a Starbucks $4, how many gallons of gas am I not buying because I’m buying these things? Okay, and it was all within this calculation of what is the price of gas? And what are the trade offs? So I think that’s a whole different challenge for people who are doing category management, which always feels very un-shopper centric to me and very much more retail centric or brand centric. But that whole world right requires a different kind of thinking about value.
It does. The other thing we have to address is the difference in the emotions that shoppers are walking around with today versus 2008. In 2008, people were proud of how they were managing, they had managed to pick themselves up and dust themselves off. Some of us literally after September 11th, they had managed to get back to find some joy in life. And they were proud that they could figure out how to get dinner on the table, to show up, you know, with their hair and makeup done. And do that on a budget. Today, people are just plain angry. And it’s who did this to me. Why are you doing this to me? And when are you going to fix it? To some extent that’s justified because nobody planned the pandemic. Nobody planned the world events that are causing this inflation, but people are angry and for brands to think that they can continue to take price increases? And when I walk around and see milk at $6.50, a half gallon for organic milk and think how much more is the store making on this? It’s our inclination to blame somebody for taking advantage.
Yeah, I do think that’s a really important sentiment for us to recognize because it does talk about trust of brands of companies at large of retailers. It’s very much reflective of that work we did that we started to call Angry Birds in 2015, before the election and the big shift in 2016. So you do see this sentiment. And I think that so much of what our work helps us do and our clients to inform their work is that feeling that changing sentiment that these little things that nobody’s paying attention to? Thank you for that summary of what’s on people’s minds when it comes to rising prices. Just quickly as we wrap up. What are we keeping an eye on in the fall? More inflation rising prices work right? and a new WELL study?
Oh my gosh, our new WELL study is so exciting, Wendy, because we’ve just as always tracked social media, track the press, and what people are talking about and starting to acknowledge that I can have all these friends on social media, but I am really very lonely. Loneliness is a huge new condition, the absorption with my immune system, which we learned to pay a lot of attention to over the last two years and all the products that are now flooding the shells to support your immune system. retailers doing subtle things to create senses of community to use the store space for community and wittingly or unwittingly, they are tapping into that loneliness for connecting with people face to face.
A working title on this study is The New Wellness Frontier, right?
It is a new frontier.
And so as we think about this, and everybody pay attention, listen up, the study will be out in September, call us, email us, sign up, you can get an early access to it. But it is a very interesting road again, looking at now we’re talking about we went from sort of sick care to well care. And now we here we are post pandemic in a new frontier of wellness, which I know is going to be really important for everybody to think about, again, in a broader contextual shop away, not just my aisle, my category.
It truly is a new frontier, because there are new conditions, the focus on immunity, gut health, loneliness, the focus on new faster ways to access health care, and the decline in trust in the established health care system. It’s just a wide open field, bold categories. I mean, we did not use to see menstrual products displayed boldly in stores. Or sexual pleasure products displayed, it’s all come out of the closet.
And they’re in many interesting and perhaps not odd places, really, we’re just not used to seeing them to your point. So there’s a lot of that work that we’ll be sharing as well in terms of the innovation that’s going on in this wellness around the world. And it did make me remark of just how exciting this is as we come out of our COVID cocoon. So lots for everybody to pay attention to including our fall update on rising prices, inflation, what all that means for not only the holidays, but coming into 2023. So lots on our plates, lots to share with everybody. So please do go to our website, wslstrategicretail.com, you will see a lot of free content, our great blogs, but also the details of all this new work, plus some of these new Hot Topic reports that look at inflation and the impact that will have and comparing the issues around 2008 to the current days. So lots out there for you. And as always, Candace, thank you for joining me. Thank you for joining us. And I suppose I have to say go Mets.
Yes. Well, finally. Oh, congratulations. That’s all right. Let’s go easily out of your lips. But thank you.
In our office, we’re taking bets on who’s going to be in the World Series. So stay tuned, everybody and not only think about the future of retail and future shopping. That’s the future of baseball. Thanks, Candace.
Thank you, Wendy.