It’s hard to say whether current trends like trading down to opening-price store brands will outlast the recession. It’s clear, however, that consumers are shifting from national to exclusive brands. Retailers are pushing these exclusive labels hard, in part because of the margin benefits and in part because of the added value perception of these brands. So the search for “value” (not just price) is likely to be a long-term after-effect of the recession.

In fact, the market share numbers make it clear that the search for value began long before the current recession. How else to explain the rapid growth of discounters, off-pricers, warehouse clubs and other mass merchants at the expense of traditional retailers like mall-based department stores? This trend is only going to accelerate in the future, as consumers grow even more focused on living within their means.

The current recession will not impact the American psyche the way the great depression did for a variety of reasons (another topic/another time). However, I do think that some of the trends that were mentioned will endure. The value trend will continue. Consumers tried lower-cost alternatives and found that they were more than just acceptable. That doesn’t mean switching to the lowest-cost alternative but to one that represents value (the definition of which certainly varies). The trend toward children staying at home longer started before 2007 and will continue as few complete a college education in four years. Those that didn’t go to college have found that the cost of being on your own has risen. Part of this can be attributed to helicopter parenting and some to the social acceptance of living at home. People will continue to seek out and purchase gasoline that represents value to them. In more and more cases it means purchasing private label or unbranded product. For the first time in a long time, people decreased their spending (even… Read more »

Had a great meeting with The Retail Prophet and we talked a bit about ‘the era of frugality’. I’m also curious to see what changes will take place with shopper behavior. I think customers will be looking for added value when shopping retailers. Loyalty programs, outstanding customer experience, great selection at value prices and fair return policies could make up that added value but I suspect the bottom line is that customers want to be appreciated. Low prices are great but what else is there?

I’m calling it: 2010 is The Year of the Customer. All policies and initiatives from this day forward shall focus on how we can appreciate our customer…and hopefully get them to spend more money in our stores.

It’s not likely that consumers will soon give up the practices they’ve honed through the recession. Selections based on “good value” perceptions will outlast the recovery. The opportunity for retailers and manufacturers has to do with defining good value in a way that resonates with shoppers. How many times have you heard about people staying away from a store because it was not clean or the staff was not helpful? Did price enter the equation? Hence, the comments in the article about service are particularly relevant for retailers. Insure shoppers a good experience in the store and you’ve contributed big time to “good value.” I am not suggesting trivializing experience by only limiting the concept to physical features in the store, but also in the selection of brands, private labels, and how they are priced…category by category. Some people are suffering dreadfully now and others feel the pain, either in anticipation or as their own income is affected. This is why recession behavior is more widespread among the population than actual economic distress, person to… Read more »

Most shoppers selectively determine what value means to them. An easy way is delaying purchases of cars and clothes. Food is often a different issue.

The second question is very important. Retailers must and can do a far better job of promoting (as in selling) their merchandise at the most important place–where and when shoppers make their buying decisions.

Regardless of what the economists say, psychologically we’re still a year or two away from coming out of the recession. For the country to reach that milestone, companies will have to increase hiring. Many workers who lost their jobs will have to adjust to living on smaller wages. That, coupled with higher health care costs will have a significant effect on consumers.

I think that consumers will continue to seek products and services that offer good value for the money, unique experiences, and/or a high degree of customer service. Hopefully they will not return to their free-spending ways, racking up credit card debt and acquiring items just for the sake of ownership. Small luxuries will be seen as ways to treat oneself on a budget.

It’s going to take a good deal of time for many people to put this recession behind them.

I have met with over a dozen retailers in the last 6 months and all of them discussed having to make changes in the way they do business because of the economy. From the way some of them are planning for 2010 it is also clear that they believe the changes they have made will stay in place as the economy crawls out of the recession. Some key trends that I picked up from my meetings. 1) Retailers will continue to focus on and grow Private Label. 2) Circulars will go through a transformation to cut cost and be more helpful to shoppers. 3) Retailers will work to simplify promotions, and 4) Coupons will continue to be popular. What I hope to hear more about in the coming year is a focus on retailers looking to offer “Made In America” merchandise. If we have learned anything from this recession, it is that not everyone can work on Wall Street and a country needs to manufacture hard goods to survive in a global economy. Retailers that… Read more »

There’s little reason to expect any near-term changes in the current retail environment until employment improves. Economists are, as usual, split on when this will happen although most see no significant improvement until late 2010. Beyond that, there’s a major demographic hand-off under way which will determine retail realities. The baby boomers are nearing retirement age. They have watched in horror as their two biggest assets–home equity and financial portfolios lost nearly 40% in a matter of months. In my view, they will not soon forget this drop. They will remain frugal even after the economy recovers. They are followed by Gen X, who were not big spenders to begin with. Put those two factors together and you get a continuing reduced aggregate spend and increased savings along with a persistent focus on value for several years. The good news is Gen Y, which is a third larger than the boomers and spend 5X what the boomers spent at their age. Their impact is already being felt in areas like iPhones and iPods and some… Read more »

I believe there will be a drastic change in the behavior of the consumer as well as with people in general. As great as the greatest generation is, the impact of a global recession and world war, is an impact that cannot be dismissed. Same is true for the ’60s generation of baby boomers that dealt with changes in social norms, music and wealth that had previously not been seen. This generation has the impact of social media as well as this recent wake-up call for the economy.

The changes to each generation are significant for the breath of impact as well as the reactions to it. In the end, we may change how we buy and what we buy, and that impact will be felt in the next generation by how they absorb our legacy.

Consumers are more aware of the cost of things than ever before and are weighing purchasing decisions based on the price of products. For example, when a company reduces the size of a product yet charges the same price, consumers feel cheated a.k.a. the incredible shrinking package. This would not have been as big an issue several years ago. CPG brand loyalty is also being challenged. Private label brands are encroaching into branded markets. When consumers perceive little or no difference, then they will switch to the lower-priced alternative. If they are satisfied, then they may never go back. Brand status is not as important as it has been in the past. Conversely, consumers are also seeking out high-end or luxury products. If they can’t splurge with the big purchase then they will treat themselves to a little luxury or treat. Things like high-end chocolates, liquor, or perfumes are good examples. Lastly, despite the economic downturn, they still want convenience. We are still time crunched and over-the-edge shoppers, hence the growth in the food industry… Read more »

I heard a presentation recently from one of my Retail Prophet LinkedIn group members, John Gerzema, that was given at the TED conference earlier this year. John talked about what he termed “post-crisis” consumerism. In it, he made several brilliant observations. For instance: 1. Prior to the fallout of 2008, the personal savings rate among consumers was at the lowest point since WWII. From 1985 onward it dropped significantly as consumers spent wildly. It has already begun to climb quite dramatically as consumers seek to de-leverage. 2. With the inception of the internet, consumers gained the ability to make more informed purchasing decisions than at any other time in history, however, this was outweighed to a great extent due to rampant spending over the last 15-20 years. As John puts it, we were actually buying medication for restless leg syndrome! Restless leg syndrome??? 3. We now have even more information at our disposal as consumers AND demand is restrained. The likelihood is that consumers will now truly begin to use the power of information in… Read more »

The recession needed to be treated with a scalpel, not a sledgehammer.

Many retailers overreacted to the recession by cutting back way too far in product assortment. The majority of consumers have not lost their jobs, still have income, and want to purchase want they “want,” and not merely what they “need.” I completely realize that this point of view is not what retailers have been told by most consultants, however, I have spoken to some retailers this past month that now agree that SKU rationalization has resulted in too many stores looking exactly the same, with all the same assortment, and without points of differentiation.

Some of my retailer clients are now looking at this a different way and working toward recovering some of the profits lost this past year from harm they brought to themselves.

On a practical level, and with specific reference to the Redbox business, one of the first areas I believe will decline is where consumers have traded significant convenience for price. The Redbox business is a clear example. In order to actually save money using a DVD kiosk, the consumer MUST return the video on time. Any other behavior quickly eliminates the cost savings. This becomes possible when money is tight enough to adjust attention spans and make the effort meaningful. Contrast this with the policies at Blockbuster or Netflix, where the consumer can be far less attentive to the need for immediate return. This is an aspect of convenience. As is the ability NOT to consume the product immediately without cost…which doesn’t happen with the DVD kiosks. However, it is not only the Redbox business which will be impacted. Any business which has flourished recently by allowing the consumer to trade significant convenience for cost will start to erode when the recession ends. Significant convenience has enormous value, very seldom will this value be adequately… Read more »

My sense is that the short-term trends that are cited are likely to be more long lasting. The dramatic fall-off in retail business late last year was the result of an overriding fear that few had experienced before. It was traumatizing, and the consumer will need to see their finances return to a healthier footing, and believe that they can once again be sustained for the longer term, before the traumatic effects will fully recede.

My current thoughts about the retail climate based on levels of business we are experiencing in my two medium- to high-end lingerie boutiques, where bra fitting is our bread and butter:

* right now, women are being frugal and not spending a lot on themselves, maybe even putting cash away, with the goal of being able to pay outright for holiday gifts, rather than charge on credit cards (which they have likely vowed to pay off and cancel in the recent turmoil).

* With joint effort, high-end retailers and apparel and accessory manufacturers may be able to sway the higher demographic back into the post-war generation’s thinking that it makes sense to pay for quality and classic styles that will outlast fads, trends, and maybe even generations (witness my dad’s alligator belt he had for 40 years! And to paying attention to where and how stuff is made….

* The buy local–it’s stimulating–movement will continue to grow, but needs to be supported on the micro level by town by-laws making creative retailing possible, acceptable, and desirable.

Many of the shopping behaviors adopted by consumers during the recession will impact how they shop in the post-recession, and those behaviors will continue to morph. But there are at least three key trends that will be evident across the retail landscape going forward. (1) Post-recession shoppers will be even smarter. The recession forced consumers to find ways to save money, and those newly-gained skills will be with consumers from now on. Shoppers will be much smarter about finding the best bargains, according to their definition of value (and “value” is defined only partly by price). (2) Post-recession shoppers will be even less brand loyal. Brand loyalty was ebbing long before the recession. But thanks to widespread trading down, consumers have learned that it’s OK to switch brands. Look for consumers to continue migrating to new brands as their spending confidence continues to increase. (3) Post-recession consumers will be continue to be in a savings mindset, not a spending mindset. Brands that believe consumers will return to the “gluttony shopping” that was so evident prior… Read more »

There are a few factors which I believe will keep the consumer from returning to their old ways. This will take years, not months to be accomplished.

First, the consumer is reducing debt at the fastest rate in history. Second, the consumer has less credit to use. Credit card companies have been reducing the consumers’ credit line with another one trillion dollars being lopped off by year end. Third, the Baby Boomers are realizing that they don’t have as much retirement money as they thought. They have always been our largest purchasing group. Their reduced spending will likely last for years. For some retailers this will mean a reduction in sales and for others, sales will be stretched out over a longer period of time.

For the immediate future, I think that the consumer will be much more frugal and slower to buy items on a whim. However, once there is some stability in the market, the combination of pent-up demand and a desire to reward oneself and the family will cause consumer behavior to change again. Purchasing will return to a more aggressive level with demand high for luxury and items of quality – as an investment.

Taking an example from Asia, gold is a constant open to buy for people here as the consumer looks at any purchase of gold as adding to their net worth, not a triviality.

How to get the cash out of an item, like a car, house, boat, artwork or jewelry, will become a consideration in the US too.

Great debate; the consumer is definitely changing and the environment for sales moving forward will be treacherous to say the least. One important audience has been left out of the discussion, and that’s the shareholder. Wall Street got us into this mess and like it or not, they will be the ones who pull us out. Retailers, as much as they like to think it’s all about the customer, only really react to changes in their stock price. The current big box retail model is based on growth in shareholder value. How will retailers meet Wall Street expectations without new store openings and growing sales volumes? Drastic changes are coming, both because the consumer is changing in many of the ways pointed out by the group and because the model that satisfied stockholders over the past 30 years is not going to work in the future. I’m hunting for new retail models that are growing in the marketplace and I have stopped focusing on the minor changes to promotional strategies that current retailers are using.… Read more »

After the recession, people will buy things as needed but I think the era of the retailer-friendly “shopping excursion adventure” is almost over for good. A story. I just returned from a weekend in Philadelphia where four of us boomer ex-college friends who live in far-flung cities met for a wedding. This group has gotten together at least once per year for various events and celebrations every year for decades now. In all past years, in each involved city, we would have trouped through an afternoon-long laugh filled shopping trip in which many thousands of dollars would be rung up on local cash registers. This time there was not even a question of shopping. Philadelphia’s unique Strawbridge’s is gone, and other stores, mostly chains, are present in our respective home cities. Instead of shopping, we spent the morning walking trough crunchy leaves in the historic district, and the afternoon at the art museum. The loss of individual cities’ signature stores and their unique downtown shopping districts are a real tragedy for retailers and ardent shoppers… Read more »

I believe the real opportunity in this market is for the value retailer that provides excellent service. There are customers that are changing their shopping patterns due to the economy but some may stay with their new stores even when the market comes back, if they have a positive customer experience and still recognize the value of the product. More importantly, some consumers will realize that when the market comes back, they should focus on saving money and not return to the same shopping patterns that got us into this mess.

Consumers have experienced changes in the past two years that have not been seen in decades. These changes include social, economic and geo-political factors that appear scary and out of control. The impact of those changes, I believe, will be felt for years to come.1. Social — the rise of social media and new technology has reversed traditional “wisdom patterns” where a clear benefit existed for experience. Now the newer you are at something, the more likely you are to understand it. 2. Economic — many people were laid off, across all ages and income levels. Yet younger people have done better at finding new jobs. Older workers have more challenges, from a skills as well as a perception perspective.3. Geo-political — we have been proud of our role in the world as a stable country promoting peace. Now, we have not always done that, but our self-perception has been so. Today, we find ourselves viewed as the cause of the global economic crisis, and hated for our US-centric world view. These changes have caused… Read more »