I’m sure the last thing you want to read, yet again, is another treatise on the impact of the Great Recession on the U.S. economy. So apologies up front. All I can say is that the effects of the recession have still not gone away.
That is clear in our biennial How America Shops MegaTrends study published in February. This national survey, conducted every two years since 1990, studies major shifts in how Americans think about and live their lives, and how and where they shop as a result.
The 2016 study, titled “Buying Happiness,” reveals much about how shoppers are rethinking the way they spend their money and what their expectations are of retailers.
Here’s a hint: They are now more focused on spending to achieve a better quality of life (i.e., happiness) and, as a result, prefer to shop at retailers that make them feel good. While that may sound like it’s positive news for U.S. chain drug retailers, it is not. So read on …
Shoppers feel more financially secure, but buying patterns have changed
The 2016 survey showed that four in 10 women are feeling more financially secure, an increase of eight percentage points from 2014. They’re beginning to spend more again across 36 of the 45 categories we track (from consumables to cars, from beauty and over-the-counter products to fashion, pets and technology). That said, many are not returning to spending the way they previously did.
That’s because the role of buying and consumption in Americans’ lives has been permanently altered. Discretionary dollars shoppers once spent on new clothes, stocking the pantry, trying new beauty or health products, or trading up to more expensive, new and improved forms are now going elsewhere.
The vestiges of the recession have left shoppers rethinking their priorities in fundamental ways. We call it the new “Trinity of Buying Happiness”:
• A More Responsible Life — What makes more women feel good now is using their discretionary income to buy fiscal responsibility. Of the many ways they can spend their money, half said their No. 1 priority is paying off debt (55%) and saving (48%). This is consistent across all income and ethnic groups. Other choices are much further down their list, for example, a vacation (35%); hobbies (29%); buying wellness products (24%), beauty products or clothes (21% each), or a nice car (19%); or getting a massage or manicure (17%).
• A More Enjoyable Life — Shoppers now want to live a better life, which means devoting time to family and friends, staying well (which means getting enough sleep and reducing stress), and doing their part for the environment (e.g., saving energy and recycling).
• An Easier Life — In earlier How America Shops studies, women identified stress as the No. 1 cause of their health problems. So it is not surprising that they are changing their behavior and choices to make life easier. At the top of their list is finding simpler ways to take care of their home and themselves, including making simpler meals, hairstyles that are easier to take care of, wearing less makeup and choosing products that make it easier to care for their skin — and anything else.
Half of shoppers said they are recapturing time by spending less time shopping and on social media, and four out of 10 said they’re spending less time checking email — and even turning off their mobile phones sometimes. Millennials are most aggressive about recapturing time: Two-thirds say they’re spending less time on social media; over half are turning off their mobile sometimes, working less and checking email less; four in 10 are cutting back their children’s activities. Anything to make their life easier.
‘Feel good’ power of retailers reveals new shopper sentiment
As they rethink their overall spending priorities, shoppers are also thinking differently about retailers they buy from.
We asked shoppers to rate retailers where they “feel good” shopping and spending. The winners were a fascinating mix: Amazon.com Inc. topped the list (80%), but was only marginally ahead of Publix Super Markets Inc. (78%), a traditional supermarket noted for its customer service. Costco Wholesale Corp., Victoria’s Secret and specialty beauty retailer Sephora rounded out the top five “feel good” retailers. Whole Foods Market Inc., Nordstrom Inc., Aldi (yes, Aldi), Ulta and Target Corp. were next on the list. (See table.)
This intriguing mix of retailers says much about what shoppers expect now, including the importance of service; convenience; an easy, edited shopping experience; and fair prices.
Only one out of two shoppers rated Walmart, CVS/pharmacy, Walgreens and Rite Aid Corp. as places they “feel good” shopping. And while those same shoppers certainly still buy at these retailers, their general ambivalence regarding the quality of the experience makes these companies vulnerable at a time when shoppers expect more than the basics of convenience and price.
The three major drug chains scored similarly to each other. Their overriding strengths were the quick trip (65%) and their loyalty programs (60%). This raises serious questions about their once intrinsic value of delivering health and wellness for the whole family. It is almost unforgivable to think that when shoppers expect retailers to help them feel good — emotionally and physically — when they want an easier, less stressful and more responsible life, America’s drug chains do not meet their expectations.
Shoppers clear about what makes them feel good
If growing the fastest makes Amazon today’s gold standard, then shoppers are clear about what a “store” needs to be to win their business. It may come as a surprise to some that it is not all about the convenience of shopping from the couch or even getting the lowest prices.
In the study, we compared Amazon to Walmart and Target for a more prescriptive view. On many “feel good” attributes, Target competed well with Amazon, scoring similarly on: a good place to browse (66% Amazon versus 61% Target), and “buy things that make me happy” (62% Amazon versus 55% Target) and “they care about me” (38% Amazon versus 40% Target). Walmart scored much lower on these attributes.
On shopping logistics, Amazon and Walmart scored similarly, and ahead of Target: convenient to get to (63% Amazon versus 69% Walmart) and having the best prices (both 65%) and ability to get a lot of shopping done (57% Amazon versus 66% Walmart). The superior power of Amazon is in its efficient use of shoppers’ time (63% versus 49% for Target and Walmart), and making women feel like smart shoppers (61% versus 45% for Target and Walmart).
Beauty specialty retailers (Sephora, Ulta, Bath & Body Works) are a second gold standard — and a good reference for drug store retailers to study. Shoppers rated them high on offering interesting and pleasant experiences (65%) and making shoppers feel smart (60%) and well cared for (60% to 70%), with offers tailored to each shopper (65%). These chains also performed well on the basics: convenient to get to (60%), efficient use of time (60%) and the best prices (50% to 60%).
So, what does all this mean for mass retailers and consumer packaged goods and health care companies? Shoppers are pretty emphatic. They are no longer the spendthrifts they were pre-recession, collecting more and more “stuff” and paying after the fact. They now have a different set of values when it comes to their lives and their spending. Companies that only deliver on Old World fundamentals — price and convenience — will lose out.
For drug store retailers the opportunities to deliver on shoppers’ Trinity of Happiness are substantial. Who better to support shoppers who want to be more responsible, are looking for easier solutions and in the end want to be more mindful and joyful about taking care of their families? However, that means drug stores must be noted for much more than being the store on the corner to buy milk, paper towels or a soda. Selling happiness to American shoppers now requires much, much more.
Wendy Liebmann is chief executive officer of WSL Strategic Retail, a New York City-based global consultancy specializing in shopper insights and retail strategy, and publisher of How America Shops. For more information contact email@example.com.