In past economic downturns, most retailers were simply able to tighten their belts and ride it out. This time may be different for several reasons. First of all, most retailers have already learned to manage their inventories closely, so reduced buying investment is not as easy. Secondly, most operators are more highly leveraged today, so even small downturns can have a major impact. (This is why we see major banks folding, even thought the actual percent of bad loans is not that high a portion of their business.) Perhaps most important is the impact of changing consumer shopping patterns. In the past, hard times meant shoppers would go to more stores to look for bargains. Today, with the high cost of fuel, shoppers are responding by taking fewer trips. The retailers that exist on the margins of these shopping patterns will be hurt severely, maybe even permanently. In this environment, retailers need to focus on providing shoppers with compelling reasons to be high on their short list of stores that offer the most total value… Read more »

This economic cycle is different. Housing is their greatest single investment for 90 plus percent of consumers. When the home value is no longer going up, the “live for today” attitude has to change. This economic time will not change consumers until housing stops dropping in value, which is a year or more away.

Consumers are cutting back on non-essentials and this will continue. Note: even upper income consumers have scaled back and fixed income consumers are being conservative in their purchases.

Retail food needs to understand who their consumers are and what state they are in before implementing a solution.

For poorly run grocers, it’s always an economic downturn, regardless of the economy. Since we all have to eat, the grocery industry is recession proof. I don’t see consumers trading down but rather trading smarter. Shopping at Aldi is not trading down in my opinion. When someone chooses to buy better quality products and at prices lower compared to traditional supermarkets, consumers are simply trading smarter. Walmart, Aldi, Trader Joe’s and many others have been growing for years–good times and bad. While the plain vanilla conventional supermarkets are improving, they are still plain vanilla and I foresee them continuing to lose market share, consolidating, and closing stores. If you are in an industry where you can’t compete with faster, smarter, privately held regionals on service and you can’t compete with Aldi, Costco, and Walmart on price, there is only one direction you are going to go. Traditional grocers will need to focus on surviving through consolidation, economies of scale and selling their story to Wall Street analysts at investor conferences.

For the most part, grocers have a fairly loyal customer base and do a great job capturing who those customers are through their loyalty programs. Like any relationship, there will be good times and bad times and customers need to know that you are there for them to accommodate their needs reflective of the times and shopping habits.

Use this competitive advantage of customer data and relationships to regularly dialog with customers not only to make them aware that there are more choices for a value-conscious shopper but also to give them a chance to keep you on top of trends/shifts in their needs. Ask yourself whether the store and your advertising reflects what customers are telling you, then respond.

They should be focusing on new store development. The change in the real estate market has made today’s market the best tenant’s market in 10 years. Landlords are giving incentives and competition is down. If a grocer wants to ramp up, they should be doing deals.

The movement toward store brands with more upscale appeal than yesterday’s generics seems to be the biggest shift going on in the grocery business. This may be a sea change that outlasts the current economic slowdown, partly because of changing consumer habits but also because of continued share gains by Walmart, Costco and so on. Short-term, it’s essential for the traditional food retailers’ survival that they establish a strong value position and brand differentiation.

The current downturn is similar but has some complexities that the ones of the past did not. For instance, multichannel offerings by many retailers and a broadening of non-traditional retailers into the grocery world.

Traditional grocers need to focus on service, convenience and value. They should identify the 80 or so top staples and be competitive on them. Consumers will go to the large box stores for price but they almost always have to go somewhere else for the fill-ins. Today, if you can avoid the second stop, you save money. Therefore, if the price was relatively close…. Plus, a dilemma the big box retailers are facing now is consumers with the disposable income to buy a 3 month supply of a staple vs. a two week supply has dwindled, therefore supermarkets will get an up tick.

What should traditional grocers be focusing on to come out ahead of the pack when the rebound happens? They should focus on the very same thing they do when there is no recession. Each of the traditional grocers holds a position in shoppers’ minds. If they determine to change that position, they’d better be ready to communicate it heavily and keep it when the recession is over. If a retailer is known for service, they must keep the service. If they are known for selection, they must keep the selection.

Their shopper is coming to their store because they have made a decision not to go to another. If price is an issue, a solution may be another line of private label that can disappear when the time is right. But a better solution may be deeper discounts on key brands to assure that when shoppers do less frequent shopping trips, they make that shopping trip to THEIR stores.

This downturn is very different from anything since the Great Depression because two of the pillars of the way society and business runs – energy and banking – are broken. The endgame for each of these issues has not shown itself, so it is up to retailers to become leaders. Supermarkets have a chance to lead the way in terms of product information and budget information. They should focus on using loyalty programs and internet communications to disseminate valuable information. Show loyal customers how key product price increases effect their weekly spend. Give loyalty program members a reason to insist that their friends and family get into their program.

Supermarkets can stay profitable in any downturn. But what’s really at stake here is the emotional connection that builds lasting loyalty.

For those grocery chains that have done a good job of not only learning about their consumers but setting up an interactive dialog with their consumers, they should be able to adapt to the changing times. If consumers are spending more time at home, then maybe more meal solutions are appropriate. That may mean meals for a family, meals for friends, or individual meals. Guessing will not lead to success. If consumers are more concerned about value, then using more private label or being selective about brands may be more appropriate. The solution for the grocery store chains is in knowing their consumers and providing value.

I think the focus should be on higher margin, value products such as private label. Grocers should expand house brand sections.

Safeway’s lines are an excellent example of offering high quality at value pricepoints. I agree with communicating the value message to the customer. There are effective methods of signing value throughout the store without going downscale. And of course, sharpen up the customer service experience. Consumers now see value in that and will shift dollars accordingly.

Traditional grocers need to consider at evolving market opportunities and tools to help price positioning.

(1) The consumer is avoiding restaurant spend. Although the consumer hasn’t found additional time to prepare a healthy and/or tasty meal, the consumer certainly feels pressure in the wallet. Traditional grocers need to jump on the emerging market of transforming preprepared meals into a commodity.

(2) The simple act of lowering prices on a whole might not be the right decision. However, using advanced logic tools like price optimization, making recommendations for product/site price combos throughout the entire lifecycle can definitely aid retailers in taking a strategic step forward in the pricing arena. Look for optimization tools that span regular, promo and clearance and consider variables such as price elasticity, cross-elasticity, promotional lift, seasonality, history, trend, assortment and cluster.

Part of the complexity of the current downturn relates to our role in a true global economy. We are no longer economic isolationists and the ability of any business to thrive in the future depends on finding a way to become part of the larger economic fabric.

I think Camille’s hit it on the head: Know your customer and listen to her feedback. Retailers who are already doing that ought to be well ahead of the game–as for the ones who aren’t, it’s time to start. If you think about it, keeping the family fed and the pantry stocked is a huge part of the life of the person in charge of that. From shopping to cooking and serving, and even fielding questions about why we ran out of cat food, it easily consumes 15 hours a week, and more if there’s a major holiday coming up. And that’s generally on top of either a full-time career or at-home child care. So chances are, you can find a pretty vocal yet statistically valid sample who will share their strong feelings about how you can make things easier for them at the store–which will in turn make the rest of their lives easier. And if you’ll act on the feedback you get, keep listening and keep delivering what you promise–you’ll be that much… Read more »

The recession is a great time to recruit top performers and buy retail assets in bankruptcy court. It’s also a great time to approach suppliers you’ve wanted, who’ve previously limited their distribution. They may be hungrier now.