What Will Entice Consumers to Open Their Wallets in 2014?

What Will Entice Consumers to Open Their Wallets in 2014?

By James Russo, Senior Vice President, Global Consumer Insight, Nielsen

Being a consumer these days isn’t always easy, especially when the economy and job markets aren’t cooperating with our lifestyles or our bank accounts. And even though global consumer confidence ended 2013 three index points higher than a year earlier, the economy, jobs and debt are still the top consumer concerns going into 2014.

In looking at trends shaping up for this year, Nielsen forecasts that global retail sales will be relatively flat, with dollar sales inching up about 1.8 percent. But growth won’t be across the board, as consumer attitudes and preferences have shifted in some areas over the past two years. Notably, health and food prices are now among consumers’ top five concerns, replacing fuel prices and work/life balance in 2011. The upside, however, is that even when times are tough, consumers will pay for things that matter to them.

Faster, Fresher, Better

Consumers have never been as time-strapped as they are today. Their desire for immediate gratification is ever increasing, but so is their expectation for quality.

When it comes to our food, it has to be faster and fresher. Delivering on this front is key, and retailers that are meeting the demand are benefitting. For example, unit growth in the fresh deli, produce and meat categories outpaced all other major categories except alcoholic beverages. And while consumers are turning to faster ready-to-heat or -eat meals, they want the feel of homemade. This is taking a toll on traffic in the frozen aisles, as frozen meal sales decline when shoppers opt for the hot deli counter.

But no discussion about commerce would be complete without a look at how the Internet has dramatically altered our consumer behavior—a trend that is only going to escalate. Today, one out of every three people who are online in the U.S. visit every month. As significant as that stat is, however, e-commerce represents only about 4 percent of overall U.S. sales—a figure we expect to grow to about 5 percent by 2015 (approximately $32 billion). So the message for retailers is clear: develop an online strategy and implement it. Smartphones, tablets and computers are always on hand, and they’re steadily becoming the way consumers shop and buy.

Wellness Required

In terms of consumer priorities, health and wellness are closer to the heart than they were a couple of years ago, with health now ranking as the top global consumer concern after the economy An array of factors support the trend, ranging from demographic shifts, government changes, and fluctuating health costs and insurance.

Health has become a broader concept than just the number on your scale. One in five people globally is looking to boost energy, and 25 percent of people surveyed in Nielsen’s annual ailment survey last year said they want to improve their heart health.

Winning companies are ensuring they’ve got the health and wellness demand covered—either through product development or by acquiring organizations that already have a stronghold in the health and wellness sector.

Where’s the Benefit for Me?

Choice is everywhere, and there’s plenty of it. The upside for brands, companies and retailers is that consumers are ready to pay a premium for it—but only if they get a premium benefit. In many ways, consumers’ definition of value has morphed beyond a simple price sticker. Today, 39 percent of consumers say they’re willing to pay a premium for innovative products and 43 percent say they’ve spent more on products and services from socially responsible companies.

So in a fragmented consumer product world, brands and companies are standing out by offering value to their customers after they get to know them. In some ways that means through socially responsible efforts; in others, that means creating a customization model for its consumer base, whether that means customizing your coffee, credit cards or cars. For others, finding a niche and working it better than anyone else is salient way to build sales and capitalize on a trend—or create one. For example, sales of buffalo meat were up 8 percent in the latest 52 weeks even though it sells at more than twice the price as beef.

In the end, it all comes down to choice and consumer needs. Today’s “needs” are different than they used to be. For example, 52 percent of U.S. consumers say they can only afford to pay for “the basics,” but lower-income consumers exhibit a bigger appetite for media than high-income consumers, suggesting that media is a basic essential. In fact, they log almost 25 more hours per month consuming media than higher-income consumers. So the goal for companies, brands and retailers hinges on getting to know their consumers, engaging with them to understand their priorities and then delivering in ways that are meaningful and create lasting value—beyond price.