CHICAGO -- Many supermarket retailers are missing a golden opportunity to cater to low-income customers, who spend as much at the supermarket as their high-income brethren and account for a larger percentage of the U.S. population.
These were among the startling facts presented by George Chirtea, a consultant with 45 years of experience in the grocery industry, at a session at the Food Marketing Institute's annual industry convention held here this month. The session, titled "Marketing to the Low-Income Customer," warned retailers against catering to "consumer royalty" at the expense of more proletarian clientele.
"The fierce competition for the affluent household may not be a smart long-term strategy," said Chirtea. "The affluent have more purchasing power, but they are a declining minority."
Chirtea noted that the growth of no-frills, box formats, like Aldi and Save-a-Lot, are evidence of the need to service the low-income customer. "Value for this customer is a cross between quality and price. We may have walked away from generics too fast," Chirtea noted.
SN later spoke with Mike Sewell, marketing manager for Save-a-Lot, St. Louis, who said that the chain sees itself not so much as marketing to low-income consumers, but rather as catering to those who "are looking for value in comparison to conventional supermarkets.
Nonetheless, Sewell said that the Save-a-Lot format does appeal to low-income and middle-income consumers. Sewell, like Chirtea, defined value as "including both price and quality."
"Naturally, we tend to locate stores within areas that have moderate- to low-end income households," Sewell said.
The format is 75% to 80% dry grocery items, with about 85% of items carrying Save-a-Lot's private-label brand names. A typical unit is about 10,000 square feet, Sewell noted. Stores merchandise groceries in case-cut boxes stacked on shelves.
Among some eye-opening statistics on income and poverty in America that Chirtea culled from the U.S. Bureau of the Census and other sources: 40% of U.S. households are living on less than $25,000 per year, and 20% are living on less than $13,500 per year. Moreover, the median family income has not changed much in 20 years, which means that most Americans are not benefiting from the so-called economic boom. Today's median family income is $35,172, but median family income in 1980 was $33,754. Perhaps the most interesting statistic for food retailers was that those making less than $20,000 per year spend $1,034 per year for food at home, while those making $40,000 to $50,000 per year spend $1,094 at the food store. The difference in spending on food is in eating out. Thus, Chirtea concluded that "The low-income shopper spends nearly as much in your store as the high-income shopper."
Chirtea then took a closer look at America's poorest households, which include the retired and the aged, recent immigrants, single parents and the working poor. He urged retailers to look at their market to determine its size as well as to profile the customer base.
He also pointed out that low-income shoppers sometimes have different needs as well: for ethnic foods for example, or for smaller sizes of grocery items, if the shopper is one person living alone.