TakeAway: The recent recession has left in its wake a deeply changed shopper: the just-in-time consumer. Manufacturers and retailers report that people are buying less, more frequently, and are determined to keep cash on hand. 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.
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Excerpted from WSJ, “The Just-in-Time Consumer” By Ellen Byron, November 23, 2010
So far, the impact of just-in-time buying on the corporate bottom line is mixed. Smaller unit sizes, for example, generally mean higher prices—and therefore higher profit margins for manufacturers. Still, the phenomenon is so new it hasn’t shown up broadly in earnings. A Kimberly-Clark spokeswoman notes that potentially higher profits on smaller packages can be offset by higher manufacturing costs.
And companies are still reeling from lower sales volumes that began in 2008 with what some dub “pantry deloading.” Over the past two years, the number of items kept in American pantries has fallen about 20%, according to a recent survey. Consumers are also cutting back on the range of goods they stock.
The new shopping behavior is having a big effect on club stores, the ultimate pantry-filling destinations, which offer low prices but require bulk purchases. Some, including Costco and BJ’s, have reported increased shopping-trip frequency and decreased transaction sizes. To adjust, some discounters are rethinking their businesses. BJ’s began courting new customers two years ago to expand its membership, including smaller households and empty-nesters. It began shrinking its package sizes, in part to lure shoppers more interested in weekly purchases than monthly stock-ups. Now, the chain sells cartons of 18 eggs, instead of only five-dozen egg packages. It offers two containers of margarine of nearly two pounds each instead of only five-pound buckets. The margarine change alone resulted in 46% more members who bought margarine. BJ’s is trying to make its stores more attractive and change promoted items to encourage more frequent visits.
The changes at retail are often prompted by manufacturers. This summer, Del Monte began reducing the number of canned fruits and vegetables in multi-packs sold at club stores—and advising other retailers to reduce the number of cans required to qualify for a discount. The company realized consumers were more worried about overall cost, even if it meant a higher cost per can.
Just-in-time consumption is also disrupting long-established purchase cycles, including the annual back-to-school shopping ritual. Shoppers of high-end discretionary products are shifting to just-in-time buying as well.
Edit by AMW
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