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Silver, Not Gold, for Supermarkets This Holiday

Are there any bright spots for the holiday selling season, with all the doom and gloom?

A series of reports last week were not encouraging as the National Retail Federation urged Congress to consider a second round of economic stimulus to encourage consumer spending, which represents two-thirds of the GDP.

  • GDP continued to shrink.

  • Consumer confidence dropped to a record low.

  • Surveyed retailers expected holiday sales losses.

  • Surveyed shoppers planned to spend less on gifts.

Add to this increased unemployment, tight credit and the overall undermining of consumer wealth — and you have the perfect scenario for the Grinch this holiday.

Food retailers, while not insulated from all the tumult, can thank God they sell the necessities of life as part of their offering, since everyone has to eat. At this year's Christmas table, though, you can expect to see more succulent roasted chickens replacing the traditional but premium-priced prime rib roasts. More shoppers are trading down in food.

Recalling past recessions, consultant Jim Wisner, of Wisner Marketing Group, said the holidays always held up well for food retailers. However, major cutbacks in spending come at the next level of discretionary purchases, with general merchandise operators.

The trading down in food is a natural way to compensate when money is tight. “People will try to nickel-and-dime their way back so they don't have to materially change their lifestyle,” said Wisner.

Herein lies an opportunity for supermarkets to endear themselves to shoppers who are possessed by new frugality.

It goes back to the basics. Help shoppers save, and offer them more value per purchase. That is nothing new, but price promotions are critical during dire times.

Publix drives to the heart of the matter on its website, where it states: “With the economy the way it is, everybody is looking for ways to cut costs. And at Publix finding those ways is easy.” The retailer lowered prices on select essentials, including its store brands.

One of the biggest ways for shoppers to save is private label. Store-brand sales also boost retailers' net profits.

Wisner sees the conversion of shoppers to private label as the real opportunity for food retailers during this tight-money period.

Private-label conversion could be a big plus this holiday. Will shoppers return to more expensive brands later? Some might, but most will not, said Wisner. “There is always a ratchet effect.”

Supermarkets' prepared-foods departments can win over consumers, too. Consumers are abandoning restaurants and will tend to eat and entertain at home this holiday. Value-packaged, low-cost meals-to-go will be in demand.

And not all the downward trends are bad. Fuel prices have dropped dramatically, providing some relief. Commodity food costs are down. Credit card usage is off, easing retailers' high interchange fees.

The times do not dictate excess this holiday. The essentials will prevail. Supermarkets can expect a silver holiday to provide sustenance into the New Year, and the hope of better times with a new administration.