For a consumer with household income of $40,000, the 2 percent increase in the payroll tax represents $800 in reduced spending power per year. This can be the difference between shopping at a lower-cost dollar store versus a mass merchandiser, increasing purchases of a store brand versus a national brand and suppressing the impulse to pick up a snack on the spur of the moment while shopping in a store. According to a recent study by market firm Symphony Consulting, the recent payroll tax increase has already had a measurable impact on the types of stores customers are shopping in, the types of brands purchased and the actual quantity of sales retailers are making.
“To date, shifts in shopper behavior are subtle, but patterns are emerging that deserve close and ongoing scrutiny,” said Managing Director of Symphony Consulting, Dr. Krishnakumar S. Davey. “Our initial analysis offers highly-current data on shopper behavior that will form the basis for ongoing research into the impact of the payroll tax increase.”
Comparing dollar sales growth in food and beverages in the first four weeks of 2013 to the last four weeks of 2012 reveals little change in shopper behavior. Sales growth remained constant at 2.1 percent in this timeframe, and food inflation growth decreased to 1 percent from 1.4 percent. However, it is telling that in the last week of the month, discretionary categories across all outlets experienced some softness.
Importantly Symphony Consulting’s analysis reveals evidence of softness in shopper purchases along several key dimensions. Dollar sales growth for all channels remained constant at 2.1 percent in the first four weeks of 2013 and the last four weeks of 2012. However, sales growth at mass merchandisers decreased to 3.3 percent from 5.3 percent in this timeframe. It appears that dollar stores have picked up some business from mass merchandisers. Club store dollar sales growth also registered a decline.
“We expect payroll tax increases will impact non-CPG spending, such as gas, clothes and entertainment, potentially more than CPG spending. However, out-of-home consumption will likely drop, and specifically out-of-home breakfast categories will be negatively impacted,” said Davey. “Consumers usually eliminate the out-of-home breakfast meal first when they cut spending. Economic growth is expected to be stagnant due to tax increases and continued high unemployment. Moreover, the recent significant spike in gas prices is going to further squeeze the consumer’s wallet. Some stores, convenience stores in particular, are very sensitive to gas price increases.
“Our data focuses on the $35 billion food and beverage segment of CPG,” said Davey. “It is clear it will take time for shopper behavior to more comprehensively reflect the impact of the payroll tax increase. After all, most consumers have received only one paycheck during the time of this analysis. It is possible that the dollar sales declines we observed toward the end of January will continue, and Symphony Consulting will update its analysis continuously to provide quantitative, statistically-significant information on shoppers’ reaction to this tax increase.”
SymphonyIRI Group is a global leader in innovative solutions and services for the CPG, retail and healthcare industries. SymphonyIRI uniquely combines powerful market and shopper information, predictive analytics, flexible technology solutions and consulting services to help its clients drive and grow their businesses. For more information, visit www.SymphonyIRI.com.
“To date, shifts in shopper behavior are subtle, but patterns are emerging that deserve close and ongoing scrutiny,” said Managing Director of Symphony Consulting, Dr. Krishnakumar S. Davey. “Our initial analysis offers highly-current data on shopper behavior that will form the basis for ongoing research into the impact of the payroll tax increase.”
Comparing dollar sales growth in food and beverages in the first four weeks of 2013 to the last four weeks of 2012 reveals little change in shopper behavior. Sales growth remained constant at 2.1 percent in this timeframe, and food inflation growth decreased to 1 percent from 1.4 percent. However, it is telling that in the last week of the month, discretionary categories across all outlets experienced some softness.
Importantly Symphony Consulting’s analysis reveals evidence of softness in shopper purchases along several key dimensions. Dollar sales growth for all channels remained constant at 2.1 percent in the first four weeks of 2013 and the last four weeks of 2012. However, sales growth at mass merchandisers decreased to 3.3 percent from 5.3 percent in this timeframe. It appears that dollar stores have picked up some business from mass merchandisers. Club store dollar sales growth also registered a decline.
“We expect payroll tax increases will impact non-CPG spending, such as gas, clothes and entertainment, potentially more than CPG spending. However, out-of-home consumption will likely drop, and specifically out-of-home breakfast categories will be negatively impacted,” said Davey. “Consumers usually eliminate the out-of-home breakfast meal first when they cut spending. Economic growth is expected to be stagnant due to tax increases and continued high unemployment. Moreover, the recent significant spike in gas prices is going to further squeeze the consumer’s wallet. Some stores, convenience stores in particular, are very sensitive to gas price increases.
“Our data focuses on the $35 billion food and beverage segment of CPG,” said Davey. “It is clear it will take time for shopper behavior to more comprehensively reflect the impact of the payroll tax increase. After all, most consumers have received only one paycheck during the time of this analysis. It is possible that the dollar sales declines we observed toward the end of January will continue, and Symphony Consulting will update its analysis continuously to provide quantitative, statistically-significant information on shoppers’ reaction to this tax increase.”
SymphonyIRI Group is a global leader in innovative solutions and services for the CPG, retail and healthcare industries. SymphonyIRI uniquely combines powerful market and shopper information, predictive analytics, flexible technology solutions and consulting services to help its clients drive and grow their businesses. For more information, visit www.SymphonyIRI.com.
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