Home Blogs Chemicals and the Economy Tesco sees shoppers entering the New Normal

Tesco sees shoppers entering the New Normal

Consumer demand
By Paul Hodges on 06-Oct-2012

Consumer mkts Sept11.pngTesco is the world’s 3rd largest retailer, operating in most major markets. A new analysis by its CEO, Philip Clarke, confirms that a generational change is underway in Western shopping patterns. Writing in the Financial Times, he notes:

‘Britons are economising in ways I have never seen in my 30 years in grocery retailing’
• People are ‘often not “going” shopping at all

These changes have major importance for the wider economy and the chemical industry.

Firstly, they confirm that people simply have less money to spend than during the SuperCycle. As Clarke adds, middle-class shoppers are now regularly buying Value products for the first time in their lives. No longer are these ‘the preserve of poorer consumers’. Instead, ‘the age of austerity has changed the mindset of consumers’.

Second, Clarke notes that ‘shoppers are less inclined to travel to out-of-town stores’. Instead, they prioritise convenience alongside lower price, and are increasingly ‘going online to check prices’ and ordering via smartphones for local collection or delivery.

Clarke’s analysis confirms our conclusions in chapter 5 of ‘Boom, Gloom and the New Normal’. As the chart above suggests, consumers are deserting the ‘middle ground’ in increasing numbers:

• Of course, luxury markets will still attract the attention of genuinely rich people. But as Burberry’s profit warning shows, their numbers are much smaller than generally thought
• Instead, people are now learning to prioritise ‘needs’ over ‘wants’. As the Western population ages, and moves from wages to pensions, people will have less and less money to spend

Equally, Tesco’s research shows the negative impact of high oil prices on the consumer. Clarke warns that ‘the dramatic rise in the cost of fuel has eaten into household budgets and hit the confidence of motorists’.

This volatility will also help to change future demand patterns, as people become much more wary of sudden shocks to their income.