What is the New Normal?
Depictions of the "New Normal" that came out of the Great Recession often paint an apocalyptic view of retail, with hordes of coupon-clippers and other obsessed deal hunters terrorizing store aisles. When they weren’t skimping, they were — horrors — saving!
In a column for Forbes, Pam Goodfellow, consumer insights director for BIGinsight, explored whether frugal consumers are indeed the new normal and pretty much agreed with the bleak assessment. In July, BIGinsight asked 8,500 U.S. consumers if they thought the economy would ever rebound to what it was before the economic crisis. Among the respondents, 35.2 percent indicated "Yes," 32.3 percent said, "No" and 32.6 percent were "Not Sure."
"With two-thirds of Americans feeling pessimistic or indecisive about an economic rebound, we’re likely to continue to see heavy coupon usage, a strong focus on budgets, further attempts at debt reduction, targeted spending, price comparisons — smart shopping strategies executed by well-informed consumers," wrote Ms. Goodfellow, who commented that mobile devices have added another tool for discount seekers.
Ms. Goodfellow noted that back in July 2009 more than two in five were confident that the economy would bounce back to its pre-recession glory. She added, "With the economy flatlining over the past four years, optimism for a rebound has been waning among consumers."
The bleak sentiment was echoed the Food Marketing Institute’s The U.S. Grocery Shopper Trends 2012. According to the report, 16 to 20 million households have shifted into the mindset that they have to accept living with less. That’s led to grocery spending running significantly below inflation.
"Retailers must adapt to win in the ‘new normal.’ There has been a permanent shift in value-seeking behavior," said Nick Hodson, partner at Booz & Co. during a recent webinar, according to SeafoodSource.
The report likewise found that technology is heightening price transparency and making it easier to find deals. Said Mr. Hodson, "There is almost no barrier to finding the lowest price."
Among the higher-income set, standards have been lowered in terms of what constitutes a luxury and symbols of luxury have become smaller, more personal and intimate. According to a survey of ‘Affluents’ (adults living in households with at least $100,000 in annual income) by Ipsos Mendelsohn, 89 percent agreed that "when I decide to purchase a luxury item, I go out of my way to find the best price possible." Less than one in four stated that "if a luxury product goes on sale, it lessens the perception of luxury."
Fully 92 percent of Affluents agreed with the statement,"To me, small indulgences can be just as meaningful as purchasing a high-end luxury product."
- The New Normal, According to Consumers – Forbes
- Affluent Family Emerges as New Luxury Marketing Segment – Ipsos Mendelsohn
- U.S. Grocery Shopper Trends 2012 Executive Summary – Food Marketing Institute
- FMI: Retailers must adapt to ‘new normal’ – SeaFoodSource
- Affluency: New Definitions of Luxury – Advertising Age
- Survey: The Frugal ‘New Normal’ Has Become the Norm – Time
- The New Normal: From Families to Nobel Winners, It’s All About Less – Time
Discussion Questions
Discussion Questions: How do you define the new normal? What new consumer characteristics and attitudes do you see? Should retailers, as some consumers have done, lower expectations going forward?
The new normal is driving six blocks to save three cents a gallon for gas. Consumers will continue to look for better prices, bargans, and clip coupons. Retailers will need to adapt and I do not think that means lowering expectations.
I just don’t think it’s possible to define a “new normal” in these times. They’re just too emotional.
In 2009, I went out on a limb and said “conspicuous consumption is dead.” The luxury market had taken an enormous hit along with the portfolios of those who support it.
The next thing I knew, the luxury market came roaring back, and we spent a lot of time talking about “the hourglass effect” — where the high-end and dollar stores were doing smashingly, while the mid-priced retailer was getting clobbered.
But wait! There’s more. In the past two months luxury retailer target stock prices have been dropped dramatically by Wall Street analysts and we talk about “empty pockets” syndrome.
So what’s the new normal there? I have no clue.
I left the states on vacation for two weeks. Upon my return (August 5), I discovered gas prices had gone up by almost 40 cents a gallon. Why? I haven’t a clue. Not one. I feel like I’m playing commodities futures every time I go to the gas pump. If I think prices are rising, I’ll fill up the tank. If I think they’re going to fall, I’ll buy just a bit. To be blunt, this is fundamentally nuts.
Consumers say they are being more frugal, yet they spent 20% more for their kids’ proms, and plan to spend more on Back-to-School. Those are (I suppose) the indulgences described above.
I don’t think we can predict what’s going to happen. Instead, as retailers, I think we have to become more agile. That means being quicker in our buys, more precise in our assortment, and flexible enough to change as these crazy times change. THAT’s the new normal to me. Flexibility. How many of us can say we’re ready for that?
Consumers are not going to be pushed around any more and they demand value. Now that the economy is in full recovery and the real unemployment rate is about 2% for those really serious about getting a job, people will still demand value.
Looking for value is the new normal, whether that constitutes buying “on deal,” using coupons, checking prices on the internet, or group purchasing. Consumers are not in a mood to waste money. This does not mean that retailers need to lower expectations. Rather they need to offer value.
Value can be a lower price, but it also can be better customer service, bundling items to gain a higher register ring while offering a savings, compared with purchasing the items separately.
It means that retailers have to work harder and smarter to gain a sale.
Consumers are obsessed with coupons for two reasons having little to do with the economy.
1. Retailers and big brands have sku-rationalized their businesses to death. The only points of differentiation remaining between one store to the next, or one big brand to the next, are discounts and promotions. Consumers have been well trained that it’s pretty stupid to pay the sticker price for any big brands these days since most are constantly on “deal” with a price reduction of some type, including coupons.
2. Coupon “clipping” has become a game. This is in large part due to social media and the ease of “clipping” coupons via the internet. Consumers have become obsessed with coupons because they feel a sense of achievement by hunting them down for brands they already buy.
I think the phrase “the new normal” is just plain dumb. Opps…did I say that out loud?
You see it everywhere and so the ‘new normal’ is feeding on itself. That is our problem! We are consumed in finding the lowest common denominator in pretty well everything from education, retail, marketing and goodness knows to politics! We’re all racing to the bottom and somehow think putting “the new normal” label on it legitimizes it as a strategy. Lipstick on pigs comes to mind here.
The last thing you want to be if you want any hope of success is to have the goal of “normal.” Even ancient wisdom says: ‘be hot or be cold…but don’t be luke warm’!
To quote Marty Feldman from my favorite movie Young Frankenstein…the name on the brain was Abby…Abby Normal. There is no normality any longer. The consumer is impacted with rising taxes and fees at every turn. Real household income and buying power is effectively less than it was 20 years ago. The middle class is smaller and the low to lower middle class has grown.
The long-standing theory that middle to upper middle to upper class consumers, those with the most income and discretionary spending, were the heaviest users of coupons no longer applies. A generality is that everyone is taking advantage of coupons, loyalty programs and rewards to save money.
As shared here, what should be the new normal is applying every strategy and tactic available to gain a competitive advantage and steal share from the competition. Leverage your customer insights to drive incremental behavior. Use smart methods through test/ learn to refine your executions and always have a plan for quick turn rollout of what works in delivering a favorable return on investment.
What new normal? I have been dealing with this since the 1980s, as our county’s economy has been in the tank for 30 years. There are many new poor pockets in this country, and the fallout from this will continue. Providing exceptional value is the norm around here, and anyone who doesn’t will not make it in the current environment.
I see this continuing forever basically, as many retailers have their own version of bottom line stores, with cheaper goods to offer. You can still make a profit, but the days of 7-8% bottom lines are gone forever.
It’s clear that consumers are thinking about purchases before making them, but that doesn’t mean that stores are empty. A recent visit to IKEA revealed a completely full parking lot and scads of people pushing heavy carts to checkout. For years, Americans spent more than they made, so the New Normal may be a good thing.
The economy is still in transition so how can we have settled on a “new normal”? While the economy continues to experience major fluctuations consumers are going to continue to be price sensitive to protect themselves.
Finally in the consumer’s mind, “small really can be beautiful.” Credit card debt is evil. Simple pleasures from modern grocery stores with small, vibrant footprints and cute mascots are winning the hearts and minds of the new Normal Milleniums.
Remember, size and “in your face” consumption really doesn’t lead to happiness; it’s how you derive those small pleasures from simple things, uncomplicated, and most often, inexpensive. Who has the most toys in their toybox is so last century.
In defining the “new normal” I am not sure “new” is the defining word. What we have experienced in consumption over the last 30 years and particularly the last 20 years has been anything but normal. By every measure, consumption in the U.S. has been obscene. Perhaps, what we are talking about now is simply “normal.”
Dechert-Hampe worked with RetailWire in 2009 on a survey that attempted to identify Fads vs. Trends brought about by the Great Recession. The New Normal implies that we go one step further and define real change.
Fads tend to be “knee-jerk” reactions to specific issues like gas prices. Trends are often precipitated by events but tend to be more pervasive and outlast specific events.
The trends toward value-seeking shopping behavior were not caused exclusively by the Recession, but were accelerated by it. They were also facilitated by the availability of better quality value brands and enabled by the technology to easily check prices.
Real change requires a consistent recalibration which stands the test of time. Certainly, the consumer has redefined value in their shopping behavior. However, it is not clear that we have suddenly become a nation of savers rather than borrowers and spenders.
The New Normal will continue to evolve as events further unfold. The New Normal of today may be just the new baseline for change tomorrow.
I’m with Paula on this one. I don’t think there is a new normal at this time. My thinking is that we are in transition somewhere but not sure what this is yet either. It has something to do with the transition of spending from boomers to Millennials and from high touch to high tech, but it hasn’t sorted itself out yet. Get ready, it’s bound to be fun! And yes Paula, retailers better be flexible.
Perhaps the term “New Normal” is a bit misleading. Retail, as it always has, continues to evolve (think of the impact of Walmart on retail in the 70s). What we’re seeing is the rise of a more intelligent consumer.
This consumer has greater intelligence about the economic situation, both personal and macro. This consumer has access to merchandise assortments, pricing information, and (through the Internet) retailers that were simply not available only a few years ago. Armed with this, this smarter consumer has far greater power over pricing than any in recent history. This will drive efficiency into retailing and, just as Walmart led to a consolidation and shake-out of marginal players, will ultimately reduce the number of retailers.
This, IMHO, will continue even when the economy improves.
The new normal is just confusion and uncertainty. There is the perception of too many problems and not enough being done to solve them, and for most people it means being at the mercy of something you can’t control. How can the Euro crisis impact my 401k so drastically? I feel like, if we could just get some certainty around some of these big issues — feel like anyone in charge actually has a handle on how to solve these big problems — a lot of that uncertainty would go away, and Paula’s “frugality fatigue” would kick in hard.
There will always be extreme deal hunters, and there will always be people who manage closely against their budgets, but that doesn’t always mean that everyone is looking for the lowest price all the time. And I think retailers play a large role in creating their own nightmares — when they don’t have consistent prices or policies, consumers learn that they can’t trust the retailer to be on their side in helping them get the best deals — the best VALUE. And so even those that might not comparison shop because of the economy do so because if you don’t, you’re an idiot.
That’s a really bad place for retail.
What has changed is the attitude that consumers are emphasizing value for price. Retailers today need to demonstrate the product or the experience value of their offers to get the consumer dollars. It is less of the “see what I bought and how much I spent” and more of “here is what I bought and here is the experience I received for my money.”
The article predicates the current economic condition as rebounding from a recession. In fact, the economy is demonstrating continued decline from as far back as the third quarter of 2007. Rising prices like we see in commodities and stocks is an increase of inflation maintained and fueled by a government of injection of baseless printed cash. The exponential yearly increase of disability claims from people of all ages may be disguising the growth of unemployment levels. This slow down of unemployment may be seen as invalid when we look at how many of these new disability applicants have been and are coming from among the ranks of households crippled by unemployment. In short, placing suspect information at any position in the context of an argument or dissertation should seriously impair its consideration for use as a tool to improve a business plan or model.
Regarding the consumer approach to spending, I am of the opinion that it is still evolving to find some success in the current economic downturn. The success of any product or service in today’s market is weighted by the price followed by established needs of the consumer market it is aimed at. What appears to me to be growing in the influence of consumer purchases is the methods and process of setting priorities to the things we need to buy with our new lower levels of buying resources. What I am now witnessing the consumer doing when the need of the product or service is established in any market segment is to immediately select a priority level on that need. That priority level is measured against the seemingly accurate information the consumer gets from many old and new sources in the market place. I have watched as consumers place priorities ahead of price considerations and purchased ahead of their initial plan. I have also seen urgent needs set aside and even downgraded to unnecessary by poorly informed consumers.
The manufacturer and retail provider need to successfully demonstrate the features and benefits of their products and services and to simultaneously respond to all market inquires and objections if they wish to get winning results. Approaching the market with lower expectations is a plan for companies to increase the number of failed market efforts. It would be a better idea to expand the number of places they listen to consumer response for the purpose of finding new places and methods where legitimate consumer feedback can be reliably gathered and successfully replied to in direct support of sales.
There’s no such thing as the New Normal — it’s all just part of the Eternally Evolving.
Consumer behavior reflects myriad trends and forces. I think there is a generally growing — although nascent — awareness that America’s role in the world is changing; that the historical structure of the nation, characterized by a prosperous and constantly swelling middle class, is a thing of the past; and, thanks to technology we are seeing a shift in what it means to be a person, i.e., where we turn for affirmation, information, opinion, etc.
This doesn’t mean that expectations should be lowered, merely that they should remain flexible.
Is it so bleak? “Living with less,” and “small indulgences.” It sounds to me like a responsibly pushed reset consumption button. Had this been advocated earlier, we’d have been better prepared. Like the Boy Scouts.
Here’s a thought on the new normal. I’d like to hear thoughts on this: I think the US should accept 8% unemployment as the new normal. We are among the most productive countries in the world. While our population of 315M continues to grow, the amount of workforce required to sustain that population is shrinking. Workers, farms, factories, etc. are producing more with fewer labor hours. We ship some of the work force overseas, and replace other workers with robots.
We simply don’t need as many people in the work force as we did decades ago to sustain our quality of life. Only the most desirable employees (productive workers, bottom line) will continue to be gainfully employed.
Thoughts?
I think we can make several observations about what the “new normal” looks like — but only at the risk of over-simplifying an economy that we know to be very complex.
1. The “recovery” has been very uneven. Those that are doing better have started to spend again, in some cases much as they did before. This accounts for the strength in luxury markets. There is, however, a vast segment of the population that is still in recession, and who are spending only on necessities.
2. For many, the recession was a very traumatic experience, with traumatic results. Spending patterns have changed, especially in the mass-market. Price competition on consumer commodities and near-commodities is more significant than ever, with no end in sight on the downward pressure. For those consumers most traumatized, they will probably never look at money the same again, and their spending patterns have likely changed irreversibly.
3. E-commerce has changed the equation across a whole range of product categories. This has and is transforming the face of retail in several categories, with books and consumer electronics the poster children.
4. This is a time of great transformation in retailing. Old truths are dying — Big Box is not better, the product curve on technology products, from innovation to commoditization, is faster than ever, the mass-market is a increasingly rapid race to the bottom, and differentiation is more critical than ever. Smart technology is only beginning to reveal the changes it has in store for retail. The old business models are under attack.
5. The current stagnation won’t last forever. The majority of consumers will someday once again have more money to spend. But we have no idea from this vantage point what they’ll spend it on, how they’ll spend it, and who the winners will be.