New research conducted by New Hope Network, Boulder, Colo., in partnership with NMI, Pleasant Grove, Utah, sheds light on the changing face of retail, key consumer targets and the best channel strategies to reach these shoppers.
“There is a big group of Millennials who are spending less; they are not spending the high dollar amounts yet," says Maryellen Molyneaux, NMI managing partner. "They are different in income and stage of life, and it affects what they do and spend their money on. The older Millennials will spend on family-type categories or stress needs. A lot of things are happening; you have to know who your consumer is.”
For instance, it is important to know that Millennials are aspirational and oriented to e-commerce. In fact, over the past 10 years, the growth in internet shopping for healthy and natural products has primarily been driven by Millennials, Molyneaux says.
“In 2017, 49% of Millennials indicated they had shopped for healthy and natural products on the internet in the past three months,” she adds.
When asked the same question in 2007, only 17% of Millennials had the same answer. Over a 10-year period, this group saw 190% growth in how they shop online.
“When you think about that, here we have another generation bigger than the boomers that we need to pay attention to,” Molyneaux says. “They have grown up on the internet, e-commerce and social.”
By comparison, 38% of Gen Xers and 30% of boomers said they shopped for healthy and natural products over the past three months. Gen X shoppers saw 91% growth from the 20% reported for them in 2007, while Boomers saw just 24% growth over 2007, when 24% of them reported shopping the health and wellness category over the past three months.
“In a lot of cases, as we look at who made the purchases of any product category within healthy and organic, we see boomers still spending more. There may be fewer of them buying, but they are spending more. We need to pay attention to that, too,” says Molyneaux.
Another way to look at consumers
While Millennials certainly are the generation to keep an eye on, the report breaks down the value of consumers in the healthy products space to capture cross-sections of consumers based on values, not just age.
Out of five shopping profiles, the Eat, Drink & Be Merry group of consumers consists of 17% of shoppers. They are not motivated by health, and therefore don’t need to be given a lot of attention.
But, there are opportunities with the Fence Sitters, who make up 23% of shoppers. These are the health strivers who don’t always stay on track, but have the “want to be healthy” mentality.
Next, the Magic Bullet crowd makes up 20% of shoppers, and have a lower commitment to a healthy lifestyle while also wanting quick, easy solutions.
The Food Actives, who make up 14% of consumers, represent the mainstream healthy crowd and are self-directed in their pursuit of better health.
At the top of the pyramid are the early adopters, the Well Beings, who are the most health proactive and account for 26% of healthy product shoppers. The Well Beings spend more than any other group on products in the natural channel.
Yet, while Millennials make up 49% of Well Beings, Baby Boomers, who make up 34% of Well Beings, spend more in the category.
“Almost half of the Well Beings are Millennials, and we have known them to be aspirational, but they don’t always spend on what they are aspiring to do,” says Molyneaux.
The Well Beings are more brand loyal and not swayed as much by price, whereas just over half of Fence Sitters, for instance, will still buy whatever is the lowest price. Well Beings can help drive in-store sales, too.
“If you can get to know the [Well Beings] group, they are always looking for new self-care methods, they are early adopters, they are loyal to brands they buy and they are not price sensitive. When you get them in and have used transparency and knowledge to attract them and they know who you are, they are more likely to buy and buy repeatedly and talk about you and your knowledge. That is how you bring more people in,” Molyneaux says.
In other words, the Well Beings are the early adopters who can help to sway the Fence Sitters and the Magic Bullet types to make more natural product purchases.
So, where to start?
First, if small retailers don’t have an online presence, they need to get one, Molyneaux says.
“No matter what size retailer you are, you must have an online presence. Do it on your own, with a consultant or in partnership with a distributor or brands. It may sound like I am preaching to the choir, but there are a lot of independent retailers who think that they can’t,” she adds.
This is not to replace brick and mortar, but to exist in addition to, as brick and mortar still accounts for 85% of retail revenue.
“Brick and mortar is not going away, it is transforming, and there is opportunity to take advantage of different channels no matter who you are,” says Molyneaux. “Online and mobile shopping can help all consumers and retailers. It’s an easy way to communicate about benefits and ingredients and to offer a deal. There are lots of ways to make your consumer happy and offer things for them to think about. How do I market myself as a store and create an experience in my store no matter what size it is? It can be very educational or pass on knowledge through nutritional counseling or a visual experience itself. It’s really more about how can I connect with my customers and what are all of my options to connect with them.”
Having a presence in both is also a way to balance out the shortcomings of brick and mortar vs. online. For instance, the cons that consumers see in shopping at a traditional brick and mortar store include the inconvenience of traveling to a store, parking issues, poor customer service, prices possibly being higher, store hours not being what they need, poor selection of natural or organic products and not finding the items they need.
Conversely, the challenges of shopping online that consumers dislike include not being able to physically see the item, having to pay for delivery/shipping, waiting for delivery, having to return the item if it is not right, not wanting to have packages left at the door and there being no easy way to have perishables delivered. Therefore, brick and mortar can capitalize on selling “fresh.”
While online sales are expected to grow in natural organic pet food, personal care and eco-friendly household products, consumers report almost equal interest in shopping online or in-store for fortified/functional foods and packaged foods.