EARLY 2015 OPTIMISM FADES A BIT

Consumers rang in the New Year full of optimism, but with nearly seven months of 2015 under their belt, this sunny outlook has faded a bit. The latest IRI MarketPulse survey found that shopper sentiment dropped in Q2 2015, but it is consistent with the dip typically seen during Q2 in past years. The good news is that sentiment is higher in Q2 2015 compared with Q2 2014, so consumers are feeling better about the direction of the economy and their own financial health, but they do remain cautious.

“That New Year’s high does give way to reality after a few months, so this decline isn’t surprising,” says Susan Viamari, vice president of Thought Leadership, IRI. She says consumers are “cautiously optimistic,” but still focused on value.

Constructed against a benchmark of 100 in Q1 2011, IRI’s Shopper Sentiment Index dropped to 123 in Q2 2015 compared with 138 in Q1; however, it does remain higher than the Q2 2014 index, which came in at 117. Overall, 24% of consumers feel their financial situation has improved during the past year, and 24% feel their situation remains unchanged. In addition, 23% expect improvement in the coming six months, which is consistent across all groups. For instance, 22% of Millennials, 27% of those age 35-54 and 21% of Baby Boomers expect this positive progression to continue throughout the remaining months of 2015.

Consumers have been cautious about opening their wallets for the past several years, and IRI says this isn’t going to change anytime soon. In fact, they are still doing their homework and planning what to purchase before they even step out of the house: 64% are making a list prior to going to the store; 52% are choosing the store they will shop at because it offers the lowest prices on needed items; and 45% are stocking up on certain items when they are on sale.

The survey found that consumers love to get a good deal, but they are even more focused on value. In fact, less than 50% of the shopping basket is purchased based on deals for two-thirds of shoppers. Since value means different things to different people, it’s absolutely critical for manufacturers and retailers to get the base price for products right. 83% will choose brands based on price in the coming year; 80% will choose brands based on previous trust/usage; and 58% will choose brands based on household requests.

“Retailers and manufacturers must work together to create holistic pricing strategies that underscore the value proposition for consumers, while still supporting their share, margin and growth goals,” said Viamari. But she also admitted that’s not easy to achieve.