Digital Spending: US Sees a New Trend

Consumers across the United States are buying fewer items across categories but spending more in doing so, says a new report. However, the volume declines across the entire consumer packaged goods (CPG) segment is quite dramatic and pervasive across categories from grocery to personal care and household products. 

The decline is even more dramatic when juxtaposed with the growth in this segment that occurred during the early days of the Covid-19 pandemic and immediately thereafter, says the report published by Mckinsey, which notes that CPG volumes declined by 2% to 4% on average with grocery as a segment showing a 2% drop between November-December 2023. 

Shopping more frequently but for less products

However, the report notes that the decline is happening in parallel to the spike in shopping frequency across most channels and categories. The two noteworthy trends that the research pointed to include (a) an increase in consumer purchase occasions in 2023 and (b) a decline in units per trip by 3% to 5% across grocery, health and beauty and household categories. 

There were some green shoots though as Gen-Z consumer purchase occasions for the categories mentioned above grew by 10% during 2023 though units per visit fell on each of these occasions. The inference is that Gen-Zers shopped one or two times more each month for groceries and bought health and beauty products on one additional occasion each month. 

Brick-and-mortar channels getting more traction

The report further revealed that consumers shifted their spends from brick-and-mortar channels to online and value channels. However, in spite of this shift, the former outweighed the volume gains made in online and value channels, indicating that the CPG goods business may require a revamp in the near future and India could prepare better from these trends in the US. 

From a channel perspective, grocery items sold via food channels and all categories sold via mass channels represented the biggest volumes in CPG and also saw the sharpest declines. The report noted that increased prices were ascribed as the major reason for consumers buying fewer items in grocery, personal care and household products. 

Another likely factor noted by the report suggests that stocking up on goods in 2022 resulted in consumers making fewer purchases in personal care and household categories in 2023. There was also a decline in purchase of discretionary items as consumers stuck to essentials. This trend has been visible in India since the past few months. 

Lessons to be learnt from the trend

The Mckinsey report notes businesses need to evaluate the portfolio to identify pockets of headroom as consumers become choosy. This could result in expanding offerings across some price bands or in-demand categories while dropping off others that do not fit the needs. Also, companies should ensure increased availability of products across value and online channels. 

Companies operating in the CPG space could also consider pricing and promotion strategies whereby they re-evaluate price pack architectures that help consumers buy the goods at the prices that they are willing to pay. Value promotions that create reasons to buy during their increased shopping trips could be the way to go.