As an economist I am regularly asked to speak to corporate audiences about trends in the economy, in the fields of marketing, branding, etc. For the companies that hire me to analyse these developments and present my research in a nutshell, these macro trends portend big changes and strategic insights.

Shopping – The Positive Economist Susan HayesCulleton CFA

I was recently asked to speak about the latest trends in the FMCG sector. What’s FMCG? The acronym means “Fast Moving Consumer Goods”. Basically, everything you can get from a shop: consumables.

As shops big and small are always observing our shopping behaviour to the tiniest degree and optimising their sales funnels, they are adapting to the changing habits of the shopper – and they might actively contribute to changing those habits, too. How supermarkets make money is becoming more and more of a science.

FMCG includes the convenience market. “Convenience” as an industry is set for growth: we’re always busier, always pressed for time, and our constrained budgets mean we have even busier lives trying to improve our lot.

In the UK alone the market of convenience is set to be worth £49 bn by 2019 , compared to its current value of £37 bn. And it’s very interesting to see who actually makes up that sector. Multiples (big store brands you’re familiar with, like Sainsbury and Tesco) actually only account for less than one in every five pounds spent in a convenience store: that’s £7.3 bn. Symbol groups like SPAR and Londis on the other hand take the lion’s share of the market, at £15.5 bn. Unaffiliated independents represent £6.5 bn, convenience forecourts (like petrol stations) represent £4 bn and cooperatives £4.1 bn.

How supermarkets make money depends on how we shop. Observers have noticed that shoppers go to convenience stores in five main patterns.

1) The big weekly shop. We go with a list, we tend to browse, we take our time, we are more open to considering special offers and that’s when we are most price conscious. That shop is part of most people’s weekly schedules.

2) Top ups. We ran out of milk or bread and shop for a few items on the way home, or we might shop more often for perishables, or we plan to cook a special recipe and need something we wouldn’t normally buy.

3) On the go for immediate consumption. That’s when we buy consumables to eat right away; a coffee and a pastry, a sandwich at lunch, a bottle of water and a bag of crisps.

4) Leisure shopping. Browsing for gifts or browsing for clothes. Leisure shopping is either mission based (we need something to wear for a specific event) or it’s Saturday afternoon leisure.

5) Functional. That’s when we get petrol, for example. We go shopping with a very specific purpose in mind, to a particular place where we know exactly where we can find what we need. We get it and we leave.

One of the most fundamental shifts happening in the marketplace is that shops are re-organising their shelves, not according to product category, but according to what mission their customers are on. Instead of putting the fruit and vegetables together, the baking goods somewhere else and the nappies and baby products in a third place, shops are paying attention to the reason we walked in, and catering to that. Somebody who wants a sandwich and a bottled drink for immediate consumption will find both in one place, on the “on the go” shelf, instead of having to wander to the back of the store to the deli and then over to a drinks fridge.

The retailer is taking the perspective that if they lay out everything that the customer might need for one given purpose, instead of organising the shop by “logical” categories, the customer is more likely to buy more. Personally, I think it’s a win-win situation. The shop has a better chance of getting more of my money while I don’t have to come up with ideas on what to eat now if I just want to satiate hunger quickly.

I find this fascinating. As I discussed in The Savvy Guide to Making More Money , the customer is not the only person with whom a business has a relationship: there are four distinct parties in the process, and it’s rare that one person fulfills all four roles. There is the influencer, the buyer, the end user, and the budget provider.

I see a similar distinction at play here: there is the shopper, the person who walks into a convenience store; and there is the consumer, the person who will actually consume what has been bought in the store. These two might be one and the same person, but their needs are actually quite different. The shopper wants to find what they need quickly, for a good price, and they might want to be in and out in a jiffy (the “top up” or “on the go” shopper); or they might want to browse leisurely and compare prices (the “big weekly shop” or the “Saturday leisure” shopper). The consumer on the other hand might want a healthy, hearty meal, or their preferred brand of cereal, or the nappy that doesn’t give their baby a rash.

When I walk into the store on a Saturday morning after a lie-in and a big breakfast, I’m one person. When I finally get home, hungry and exhausted on Tuesday evening and mentally working out what’s quick and easy to make for dinner, I’m a different person. Instead of focusing on the person I am on Tuesday evening, a shop targeting shoppers on their big weekly shop will choose to focus on who I am on a Saturday morning, and will arrange their shelves accordingly. If you’ve ever tried to do your big weekly shop in a small SPAR, or to find what you need for on-the-go, immediate consumption in the huge supermarket on the edge of town, you will know what it means…

Different shops are tweaking this approach to reflect different missions: they might group all health products together, whether food or toiletries or cleaning products or vitamin supplements. They might group all locally produced items together, to appeal to the ethical or patriotic shopper, etc.

Rather than thinking about what I might like when I get home, shops are thinking about how they might approach me while I run in the door: that’s how supermarkets make money. It might seem like a tiny detail, but think of it next time you shop – and be amazed at the many ways it influences your shopping behaviour.

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