OPEC Loss is Grocers’ Gain: Precima National Survey Shows Grocery Store Is Most Likely Place for Americans to Spend Savings from the Pump

timjsmith

Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published January 3, 2009

Groceries are the top item on which U.S. consumers are spending their savings from lower gas prices, ahead of putting the money in savings, holiday gift buying and paying off credit cards, according to the results of nationwide research from retail analytics firm Precima.

Of the 3,013 consumers who were asked to choose from a list of ways they use money saved on gas, 48% said they’re spending it on groceries, followed by saving (42%), holiday gift buying (37%), paying off credit cards (30%), entertainment (10%) and other (14%).

Since mid-July 2008 when the pump price of gasoline hit a record high over $4 a gallon, prices have dropped 57%.

The gas-to-groceries switch is even higher in certain key sectors. Among those survey respondents who said they’ve suffered a direct financial loss during the recession, 55% said they’re spending gas savings on groceries, and for those whose annual income is under $35,000 the number is 59%.

Conversely, 34% of retirees said they’re spending gas savings on groceries.  The number fell to 29% for those whose annual income exceeds $100,000.

“Clearly this is a silver-lining for grocers in the economic dark cloud,” said Brian Ross, general manager of Precima. “With relief at the pump, consumers are returning to some of the aisles they may have foregone in recent months. This significant trend builds on findings we uncovered in earlier research that showed that consumers are now eating more at home. These trends present real opportunities for grocers who target their strategies to meet the needs of cash-strapped consumers.

Precima is a LoyaltyOne company. Its Nov. 28 – Dec. 8 online survey of 45,000 households was conducted by ICOM Information & Communications. The survey is compiled from 3,013 respondents, 2,862 of which are drivers. Respondents are nationally representative of U.S. grocery shoppers.

In another significant finding from the survey, nearly two-thirds of respondents said the recession is changing the way they plan their grocery trips, particularly in regards to pantry-loading. No less than 27% of consumers said they can no longer afford to stock up on food and now buy only what they need week to week.  Another 35% said they stock up more than they used to, but only when items are on sale.

Of the 65% of respondents who said their stocking habits have changed, 5% said they stock up more, 54% said they stock up only when items are on sale, and 41% no longer stock up at all.

“Given the importance of winning the stock-up trip in key center-store categories, this is a clear call to retailers to look at pricing and promotional strategies for these items.”

Survey takers were asked about the factors that drive their choice of grocery stores. When queried about the grocery category most likely to make them switch supermarkets to get a better price, the results were as follows:

  • 76% fresh produce
  • 72% meat and seafood
  • 71% dairy.

The other switch-store choices included paper products (62%), canned foods (55%), snacks-beverage-candy (53%), convenience foods (41%), deli (39%) and baby products (15%).

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About The Author

timjsmith
Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.