Changes in consumer behaviour in the developed world will have implications on product development and marketing as well as the way consumers shop. Mid-market segment is expected to decline by 10 percentage points from current levels by 2017

The Research and Advisory division of Rabobank International has released an insightful report on consumer behaviour which could have implications on the future of advertising, product development and the way consumers shop in the developed world. According to the report, the emergence of the so called ‘hybrid consumer’ is here to stay. A ‘hybrid consumer’ is one saves money to buy essential and low-value items while at the same time buys premium items. It is the products in the mid-market segment that will get affected as the hybrid consumer does not perceive quality or value in them. Rabobank expects this category of products to decline in the developed world over the next four years or so. The report states: “Rabobank expects the mid-market of standard, non-distinct food products to decline in the coming years as hybrid consumers increasingly opt for either basic, value products or more expensive, higher quality products at the premium end of the product spectrum. While extreme ends of the market are set to grow by high single-digit numbers, we expect the mid-market to decline by one percent to two percent per annum through 2017.”
 

The share of the market of the value and the premium segments will rise while the mid-market segment will fall. The figure below illustrates this.

Rabobank cites three factors for the emergence of the ‘hybrid consumer’ namely: socio-economic, retail strategies and macro-economic.
 

One of the significant aspects of changing socio-economic conditions has been women empowerment and the rise of millenials. Women empowerment has significant implications as they increasingly decide household purchases and earn more at work. The 2^nd class of consumers, the millenials, are now empowered with social media tools to make more discretionary purchases. Rabobank believes that those born in the 80s and 90s will shape how products of all types are consumed in the next few years.
 

The second factor for the rise of hybrid consumer is changing nature of retail itself, which is no longer interested in homogeneous products sold through brick & mortar stores. With the rise of the internet and social media (which diminishes cost of marketing), there is onus on differentiation and specialisation. This has given a rise to premium (as well as value) private labels who also do not need expensive real estate sell products. Rabobank states: “In our view, online grocery shopping will mainly be driven by click and collect sales with the shopper picking up their groceries at a local establishment after selecting an d paying for them online.”
 

The third and final driver leading towards emergence of hybrid-consumers is the challenging macro-economic environment in the devloped world. As purses tighten, consumers trade down heavily on essential goods such as grocery, saving money in the process, and use some of that to buy premium products. This phenomenon has also led to rise in heavy discount stores. The report states: “We believe existing hybrid consumption patterns have been strengthened on the back of the decline in real household incomes, leading to more pronounced dualisation of the market in recent years as consumers make more choices based on budgetary constraints.”
 

The biggest casuality of this phenomenon, according to Rabobank, is the mid-market segment which is thriving so well in developing markets. Rabobank expects the market share of the mid-market segment to decline from 60% to 50%.
 

Retailers and marketers who are present in the mid-market segment will have to rethink their strategies by either going up the value chain or the other way. Strategies also include differentiation, shift towards selling and marketing over the internet, precise segmentation of consumers, continued investment in brands as well as domination of entire category that includes both premium and value segment. Rewiring internal processes is also a must, from cost-cutting to consolidation of portfolios to realigning the supply chain.
 

The chart below shows the implied growth rate of categories in both America and Western Europe.