Editor's note: In what we plan to make an annual end-of-year tradition, RetailWire has compiled a list of the most significant retail industry "Turning Points" of 2008. (See our news release...) What follows is the third of a series of 12 discussions based on the list.
Manufacturers, mindful of decreased consumer purchasing power and the need to protect corporate margins, have tried a combination of tactics including multi-stage price increases and package downsizing.
In some ways, though, it's all about semantics. Economics and the economy may be blind spots for many consumers but they all understand having to economize. The meanings manufacturers and retailers try to communicate don't always match consumer understanding. Words such as "value" and "cheap", "promotions" and "sales", "profits" and "dividends" influence, and are influenced by, changes in what people buy and where. What retailers offer, and what consumers seek, are not always the same.
Perception and fear are factors as much as actuality. Whether recession has hit a specific home or not, most people are reducing their outgoings in anticipation that it might. As prices of food (and fuel) went up during the year, amid concerns that they would not be reversed any time soon, alternative shopping patterns quickly emerged.
Many manufacturers and retailers have tried to hold their prices but, in any supply chain, there will always be someone at the bottom of the heap getting crushed. And some, at the top, chasing profits no matter how they are achieved. Not all the attempted solutions are as transparent as they could be; sometimes that matters more than at other times. Based on some of the articles cited below, and others, we discussed whether or not consumers care that pack sizes are changing or getting smaller in order to avoid increasing prices. And how much they care about country of origin, labeling, additives or anything else so long as prices are low.
Private label manufacturers (including national brand manufacturers looking to keep their production lines working to capacity) and their retailers may end up being winners now and for a long time to come. More retailers are offering their own label products as an alternative to national brands. Discounters such as Aldi and Lidl don't even carry brands other than their own.
The offer, therefore, has changed. Shoppers are spending their money differently - buying different products from different stores. Discount, thrift and one price for everything stores are seeing growth from groups who may never have entered their portals before. Food - the one thing people cannot stop buying - is available from a wider range of outlets. Which will survive is one of the biggest questions for the industry today.
Discussion questions: Do you believe most middle class consumers who are currently reducing their spending are doing so in anticipation of the effects of recession or are most really feeling the pinch already? How do you expect the consumer price/value psychology to progress in 2009? How should manufacturers and retailers respond?
- On store shelves, stealthy shrinking of containers keeps prices from rising - Los Angeles Times
- Shoppers 'cheated' as brands downsize - This is Money
- Value retailers to prosper in 2009 - study - JustFood
- Discounters continue to grab market share - JustFood
- Aldi and Lidl to aim for the middle classes - The Independent