The End of Pantry Loading As We Know It
By Bernice Hurst, Contributing Editor, RetailWire
Just-in-time is a familiar
methodology, designed to keep cash flowing and stock levels manageable. It
has been used across the supply chain for years. More recently, consumers have
been getting in on the act. For some, the new normal means putting pennies
into piggy banks rather than pantries to achieve maximum spending flexibility.
Manufacturers
and retailers are responding by adjusting pack sizes, according to The Wall
Street Journal, which reported, "Executives peddling
wares from canned goods to cashmere say the shift in consumption habits is
prompting them to change how they produce, package, price and deliver their
goods."
Revised demand adds to pressure on companies that have already
noticed lower sales volumes due to "what some dub ‘pantry de-loading’." A
recent SymphonyIRI survey revealed that, over the past two years, the number
of items kept in American pantries has fallen about 20 percent. The range stocked
by average households has also gone down from 404 "unique items in medicine
cabinets, pantries and cosmetics bags" in 2006 to 369 this year.
Procter & Gamble,
which has been tracking consumers’ pantries since mid-2008, found "about
one-third of consumers are changing their pantry levels, with about 75 percent
of those cutting back on inventory."
Less stocking up and more just-in-time
buying in pursuit of frugality has also affected club stores, "the ultimate
pantry-filling destinations" whose
low prices are available only with bulk purchases. The Journal says
Costco and BJ’s are amongst those reporting increased shopping trip frequency
and decreased transaction sizes.
"This concept that club stores are only for the stock-up visit — I
don’t think that’s true anymore," said Bruce Graham, BJ’s senior vice
president of food.
As far as clothes are concerned, Mike Berry, director of
industry research for MasterCard Advisors SpendingPulse, explained that, "from
2003 to 2008, women’s apparel sales tended to peak in September." This
fall, however, that changed while summer dresses will arrive at online retailer
Net-a-Porter in April or May next year instead of their typical February delivery.
Discussion Questions: Does it make sense that there is a decline in bulk
buying in the U.S? Do you see it as a long-term trend and how should retailers
and CPG suppliers respond?
Later marriages, shrinking families, Boomers living longer all point to pantry deloading and less bulk buying in the future. Savvy manufacturers and retailers can take advantage of this trend with alternative marketing, management of SKUs and finding ways to make the shopping trip less chore and more pleasant as people make more trips.
This story has been discussed before, under a different angle. North American customers are downsizing. They tend to go to smaller more local stores, shop more frequently and buy less each time. The North American customer is adopting a “just-in-time” model with grocery purchasing and consumption. Of course with every change comes an opportunity. Sales might go down but margins (smaller pack sizes) could go up. Additionally fresher products (again higher margins) could also help the store’s bottom line.
The Great Depression changed American’s view of money and shopping for over a generation. In the early 70s, the family savings rate was over 12%. In 2008, that rate had fallen to -1%. That’s right, Americans were routinely spending more than they were taking home.
While the recent financial collapse has not been as severe (or at least not yet), it has undoubtedly changed shopping habits, for many out of necessity, and for others out of a new perspective on financial management. My sense is that this is not going away soon.
One of the elements that may be driving this trend is time. During difficult economic periods, more people are out of work and those that are working get less overtime. Both provide “extra” time that was not available before. Couple this with less money to spend and you have two factors that can contribute to smaller, more frequent shopping trips. Not sure I need to spend $16 on that 24 pack of paper towels, Better to buy the 4 pack and keep the rest of that cash handy for whatever may come up.
Smaller is the new in thing. Houses are getting smaller, restaurants are serving smaller portions, the size of the shopping list is getting smaller. Consumers are asking, “Do I need all of this and do I need it now?”
Owning less stuff is the new thing; get used to it for a long time to come.
Yes it makes sense and, therefore, yes it will continue. The country is changing–demographically, politically and from an economic point of view. It would be irrational to assume food buying patterns would remain the same as they always have been.
Yes, downsizing, less bulk buying and pantry de-loading are fashionable in these tough times, even though the recession is “officially” over. But everything runs in cycles and consumers are forever fickle. If and when the economy really improves and unemployment declines, consumers will revert to their former habits. Hey, didn’t retail sales on Black Friday top last year’s tally? Gotta have that big flat-screen TV!
The state of the economy dictates holding on to the available cash rather than bulk buying to save a few dollars. This is going to be long term. Buying has changed as we knew it. Not to say that bulk buying is finished. But the bulk buyers now are those in small retail businesses having space to store it while buying at a lower price.
If the economy comes back strongly (and it may not), I’d certainly expect to see a shift, to some degree, back toward more buying in bulk and filling pantries again — at least for awhile. But I agree with the overall thread here, that the trend is toward more buying ‘just-in-time,’ for all the good reasons cited.
I don’t know…maybe there’s a small short-term trend back, but the lines at Costco are still long and their comps are still way up. If I compare to 10 years ago, I’ll bet a lot more of us have 12 packs of paper towels and 360 count bottle of Advil squirreled away these days.
Cost savings were a major motivation for companies to rethink supply chain issues and move toward just-in-time which resulted in lower inventories and more turns. Given the economic pressures facing consumers, it is certainly possible that cost savings are a major motivation for reducing the amount of goods in home pantries resulting in lower inventory and higher turns.
While downsizing and pinching pennies are one reason for smaller pantries there is also a segment of foodies and slow food devotees who shop frequently for fresh foods, cook a lot from scratch and would not be labeled as prime customers for processed foods.
One should also be aware of a growing number of families who for religious or political reasons are stockpiling up to a years supply of food. Their pantries are growing in spite of the trend.
We remain a consumer society, but we consume less and we consumer smaller. It is not only an economic decision. People seem to finally realize that if we continue to eat larger portions, we ourselves will continue to grow larger. The obesity factor is becoming huge (pun intended), and the reality is, people are starting to limit the large sizes of products that they are willing to have in the pantry, if for no other reason than they want to reduce temptation.
We will continue to see the “smaller package” trend as people consume less, consumer slower, and consumer smaller portions. It has to be a good thing…a healthy smaller customer is better than a larger, unhealthy consumer.
As a point of clarification, just-in-time delivery was pioneered by Japanese automobile manufacturers and is definitely not the exclusive purview of retailers. In fact, retailers were very late to the JIT party, following manufacturers by a number of years. And, the term “pantry loading” (found in the headline for this discussion) applies only to food purchases, not to clothing as referenced in the final ‘graph introducing this topic. How does one “load” their “pantry” with shirts, shoes, and socks? As an aside, please give me credit for avoiding a crude wordplay connecting “pantry loading” to something coarse regarding undergear, and for not specifically referencing the edible versions of same. If you want to discuss pantry loading, clothes purchases are off-topic (unless, of course, Lands’ End has a sale on the tall sizes of their $36.50 jersey knit pants – at which point I will load my clothing pantry).
Bulk buying applies to bulk consumers, i.e. large households (HHs). But, there are fewer large HHs. Get it? According to the U.S. Census, “The average number of people living in U.S. households has dropped almost one whole body each time the country adds 100 million citizens.” Also, single-person HHs steadily increase while the U.S. birthrate steadily decreases. Could these trends negatively influence bulk grocery buying? Ya’ think? Trends in bulk buying are less driven by the economy than by HH body counts.
As inflation on consumables starts to ramp up even more, shoppers will quickly learn that it is like earning good interest on their money to stock up today rather than buy the same non-perishable or freezable item in a few months at a higher price tag. We figured this out in the early ’80s WIN days–and stocked our larders. Many consumers will remember or will figure it out anew.
Near as I can tell, Costco is at least bucking the alleged trend averaging eight percent same-store sales gains in the most recent reports I can find.
While I did get a great bundle of a dozen sweat socks there on my last visit, that’s really not helping my pantry.
What I can say is, I have at least 50 rolls of toilet paper, several bundles of paper towels, more cans of Lysol, furniture polish, boxes of trash bags, multipacks and refill bottles of window cleaner, etc, than I can ever use on the shelves in the basement. Did I mention those packs of huge canisters of three different types of towelettes that dry out before you can possibly use them? I have several bundles of those too! They smell great!
Did I mention an eight percent same store sales increase? Oh, so that’s how they do it!
And, by the way, last Sunday, at my local Costco, all lanes were open, three associates working on each lane and lines were back into the aisles. It wasn’t Black Friday or Cyber Monday. It must just be one retailer bucking the trend. In addition, there were no bags!
It will be interesting how the ‘auto-stock’ features of companies like Amazon will affect this equation. I know a growing number of parents who order things like diapers from Amazon (and others websites) where they are automatically sent a refill order on a set schedule. In a way they are still ‘filling their pantry’ but the pantry is sitting in Amazon’s warehouse. They’re saying I’ll buy it now, but send it to me in a ‘just-in-time’ manner. There are efficiencies here to benefit both the retailer/supplier and customer, at least for those companies in the game.
Consumers have learned that there is only so much money to go around. This is affecting families in many ways. Consumers are cross shopping, comparing prices, looking for deals and checking out online sales.
With consumers shopping more frequently, retailers should emphasize fresh options, local products, convenient meals, private label products, healthy choices, and overall value.
My advice to retailers–make it worthwhile for consumers to visit your store more frequently than your competitor’s store!
The decline in bulk buying is a direct result of the recalibration of consumer values and manifesting trends: smaller homes (less space), demand for fresher products and frugality.
Given the streamlined lifestyles adopted by consumers during the recession, the cutting back of bulk purchases makes sense. Not only does that behavior save pantry-refill dollars, it also keeps today’s more mindful consumers from buying too much and having those excess pantry items spoil.
Is this a significant, long-term shift in shopping behaviors? For some consumers, perhaps. But for heads-of-households who are purchasing for growing families, I don’t see bulk buying going away.
Where I do think the just-in-time consumer lifestyle presents brands with an opportunity is among certain demographics, e.g., younger consumers who may be living on thin budgets, urban denizens who may have limited pantry storage, single consumers who are staying single longer, and the growing senior demographic, a consumer that often seeks smaller product packaging. For such consumers – as well as any newcomers to the just-in-time lifestyle – brands should begin to think in smaller-lifestyle terms. Earlier this year, for example, Tesco launched a BOGO that included giving the shopper a voucher so they could return at a later date to claim their free item – thus reducing potential waste of perishable product.
The decrease of home pantry loading in response to economic distress simply feeds into a longer-term trend. The movement away from large stores (the small store movement – Walmart snapping up real estate for neighborhood shops, for example) and paused movement of an economically rising society to the usage of local stores as communal pantries.
Some years ago, some homes began to be built with more minimalist kitchens. Many people found less need for extensive food prep, often stopping on the way home, for example, to acquire specifics for dinner. Thus the store becomes the “pantry,” shared by the entire neighborhood – the communal pantry. This of course matches well retailers’ recognition that to compete, the distant big box is inadequate, and thus the small store movement feeds a social trend fed by prosperity.
The lack of prosperity feeds the same movement with economic stress promoting an empty home pantry – and reliance on just-in-time acquisition of only immediate needs from the communal pantry. But this just-in-time characteristic is also the dominant feature of the quick trip. Quick trips are dominated by purchases only of items for IMMEDIATE consumption or use. Even in a full sized supermarket, fully half of all trips acquire five or fewer items.
As a final note, this communal pantry, just-in-time, quick trip, small neighborhood store, harks back to the origins of retail in the developing world where stores are often little more than a closet, and no one buys any more than the absolute minimum for their immediate needs – hallmarks of the traditional trade.
With high unemployment and those with jobs fearing the loss of their job, consumers are holding onto their cash longer. Consumers are watching their cash flow and are starting to realize that saving .3/oz on a large container of Peanut Butter is not worth paying $8 versus paying $4 and keeping the difference in their pocket for a rainy day.
Retailers can take advantage by converting their institution size sections back to standard size SKUs and offering more lost cost/unit SKUs.