The rise of the value-driven consumer
With consumers feeling the squeeze in today’s economy, they’re becoming increasingly value-driven, according to a new report from Nielsen Canada. Nielsen’s Middle Class – State of Mind, State of Wallet study is based on a survey of its Homescan panel members on their views on spending. Nielsen also looked at their actual purchase behaviour. The research firm then grouped consumers into three buckets:
- Free Spenders: able to spend freely
- Living Comfortably: what Nielsen defines as the middle class; people who live comfortably and can buy things just because they like them
- Shopping Basics: those who only have enough money for food, shelter and basics
In 2014, 11.2% of Canadian households were “free spenders,” and in 2015 that number dropped to 9.9%. In the “living comfortably” segment, the percentage of households fell slightly from 60.3% to 60%, while “shopping basics” grew from 28.5% in 2014 to 30.2%. “Consumers are very much value-driven, our spending power is being depleted and as a result, consumers are shifting down,” said Carman Allison, VP of consumer insights at Nielsen Canada. “We have free spenders who are shifting more to our definition of the middle class, and we have a greater proportion of Canadians who are shifting down and shopping the basics.” Consumers believe they’ll be feeling the pressure into 2016, too. When asked if they think their spending power is going to increase in the next year, 18% of Canadians said yes, 53% said it’s going to hold, and 29% said it’s going to decline. “There’s still a lot of uncertainty out there, so I don’t think as Canadians we’re feeling optimistic that our spending is going to increase,” said Allison. “There is still going to be this value-driven consumer out there and value is going to be a key motivator for a lot of Canadians.” The study groups consumers based on their mindset, rather than just household income, since other variables come into play including household size, lifestage and location. “Free spenders” are typically two-member households over age 55, with $100,000 in household income; “living comfortably” are 4+ member households in the 45-64 age bracket, with $70,000 in household income; and “shopping basics” are 3+ member households under 54, with under $50,000 in annual income. The study looked at spending across CPG channels including grocery stores, mass merchandisers, warehouse clubs, drug stores and general merchandise. In terms of who shops where, more “free spenders” shop at warehouse clubs such as Costco than the other cohorts, while more “shopping basics” shop at general merchandise stores such as Walmart. “Think of
