Press Centre

As the recession tranforms consumers, there will be greater demand for transparency from retailers says Asda CEO

ASDA President and CEO, Andy Bond, has today predicted that the recession will fundamentally change consumer behaviour and that retailers who fail to adapt to the new reality won’t survive.

Speaking in London at a seminar organised by ASDA and Cebr to discuss the impact of the recession on consumer spending he said:

“We can already see how changing attitudes are affecting customers’ shopping habits.

Consumers are not prepared to pay a premium when they cannot taste the difference*. The era of conspicuous consumption is over. Saving money by cutting out waste of all kinds will be the priority. I don’t see this as being a short-term response to the recession but a fundamental shift that will see the emergence of a new breed of customer.

“The new emerging consumer will demand more value for money than ever before and genuine price transparency. Retailers will have to respond by adapting their business models if they are to survive.

“Retailers with authentic low cost operating models, who embrace sustainability as a means of reducing costs and who are transparent about how they pass savings on to their customers will be the winners. Those who continue with high/low pricing will become increasingly distrusted.”

In a warning to politicians he went on to say:

“Regulation is the enemy of low cost retailing. Government needs to stimulate competition by carrying through the proposed reforms to the planning system and at the same time resist the temptation to bind retailers in red tape, codes of practice and ombudsmen.”

On the economy:

Douglas McWilliams, chief executive of Cebr said: “Our latest forecasts show that spending power on the ASDA income tracker will actually improve next year due to rapidly falling inflation, but the key theme for UK households will be increased thrift in the face of rising unemployment, constraints on credit and mountains of debt built up over the last decade.

“So, while disposable incomes will benefit from the collapse in global commodity prices, the recent VAT cut and interest rate cuts, the stark economic realities we now face will encourage saving not spending.”

Notes for editors

*Through its comprehensive Pulse of the Nation survey of 10,000 ASDA shoppers (online research conducted by TNS), ASDA has identified a number of key trends that demonstrate consumers’ needs are changing in the current economic climate:

A new ‘hate waste’ mindset is emerging as customers redefine ‘need’, leading to a new kind of DIYer

• “I need my hair dyed, but I don’t need someone to do it for me” – visiting hairdressers is down 39%, hair colour sales up 27%

• “I don’t need to pay a premium when I can’t taste the difference” – Schweppes tonic water only up 7%, ASDA brand tonic water up 46%

• “I don’t need to pay for something I can get for free” – sparkling water up 1%, still water down 15%, flavoured water up 10%

• “I don’t need someone to do my food preparation for me” – ready meal sales significantly down, sales of core ingredients up due to 43% of people doing more scratch cooking

• Simple practical steps to reduce waste are becoming the norm with 69% freezing more things, 40% no longer throwing away leftovers and 31% washing clothes less often

• Customers are also becoming more considered about what they buy with 40% looking for the longest date codes more now when putting products in their shopping basket and 38% buying less perishable food

But customers are still willing to pay extra where they see a real benefit

• “I still need great quality food and drink” – smoked salmon up 17%, champagne up 96%, olives and antipasti up 52%, balsamic vinegar up 70%, olive oil up 19%

• “I still need ethical standards” – barn eggs down 22%, caged eggs down 5%, free range eggs up 8% demonstrating that ethical products can still sell with a modest price premium

• “I need to be kept entertained at home” – 57% of people are going out less, even those without kids. Only 12% of people are reducing their TV package despite the significant cash saving they could make by doing so. Sales of family DVDs are up significantly, sales of electronic games and consoles also continue to perform very strongly

Kids’ presents are insulated this Christmas, but gifts for partners and other adults will suffer

• More than half (52%) of customers are cutting back on presents for other adults such as family and friends, but only 20% will cut back on main presents for their children whilst 32% will spend less on stocking fillers

• Customers are cutting back on pre-pared vegetables and doing the food prep themselves, switching to smaller Christmas cakes and standard mince pies and puddings, whilst cutting back on non-essential treats

The realities of the new economic environment and what it means to customers’ lives

• The vast majority of customers recognise the realities of the new economic environment with 76% expecting life in the UK to get worse over the next three months as the economy, cost of living and job security worsen

• However, whilst 74% of customers think the credit crunch has put more stress on them and their family, 61% of customers think it has actually brought their family closer together as they spend more time together

• Huge pressure is now being exerted on waste in all its forms: literal waste is being reduced through freezing, recycling and reusing, whilst wasting money on needless goods, baseless premiums and oversize packs is becoming unacceptable

• Only brands with significant or perceived product differences, or product categories that provide genuine benefits will continue to prosper

The role of the supermarket?

• When asked who can best help customers through these times, 23% believed supermarkets are well placed to help, second only to ‘me and my family’ (37%) and ahead of friends (17%), high street retailers (12%), government (9%) and banks (4%)

Posted in Press Centre on 11 December 2008