Monday, July 14, 2008

Sell me a ticket for the retail rollercoaster?

Today my daughters and I had an hour to find a light colored shirt and dark pants or skirt for each of them to wear for an orchestra performance. Amazingly (and especially after my recent complaints about the Gap chains), we found three out of four items in the Old Navy sale rack in half an hour. For under $20! So far this summer I’ve split my time almost evenly between big retailers and local merchants and it’d take a crystal ball to predict when or where I’ll end up on any given day.

Some of the most insightful comments about retail behavior links consumption patterns to the suddenly shifting waters of socioeconomic stability, creating what, to others, might look like chaos. Paco Underhill is one such commentator. Here is his version of what's coming (summarized in C B. Whitmore’s blog):

+ One third of the American population lives from one paycheck to another, with little savings [note this includes middle to upper income households]. For them, " is going to come to a standstill. Forget the organic produce at Whole Foods; they will buy food at ALDI, Trader Joe's and Wal-Mart."

+ Another third "is not at immediate risk, but they are scared... This group of Americans is taking pride in spending their money well..." They are the ones doing tons of research on the Internet, asking questions and making sure that anything they purchase captures the full bundle of value that they expect.

+ The last third is financially secure with mortgages paid off, retirements plans fulfilled. "The recession will have limited effect on them.... They'll go to Trader Joe's because they like it, and to the department store whenever they want."

Paco predicts that "the world of shopping is on the edge of a new form of chaos." Why? Because despair from one-third will mean little to no shopping; frantic bargain hunting from the middle third means a lot of channel churning, and from the last third you can expect disinterest because they essentially have all of the stuff they need.

He says "It will get ugly."
As we’ve been pointing out, it’s ugly already. Retailers are scrambling to scale back over-ambitious expansion plans (Starbucks), propose marketing strategies aimed at demographics that still seem willing to spend (Old Navy), reconsider plans to merge with too-similar competition (Sears), and try to re-make notions of value and necessity (Wal-Mart). Not all of it is working, especially since none of these strategies addresses any of its respective retailer's market segments squarely – and there’s movement between them. As someone who frequently moves back and forth between at least two of those categories, I’m sure my own shopping patterns look like a roller coaster ride through the retail amusement park – and like a lot of purported thrill rides we don’t choose to be on, not all of it is fun.

Underhill goes on in DDI to make a bunch of suggestions about how retailers might address this more appropriately. I have two favorites: one is supply chain management. Rather than focus on constantly upgrading or tweaking products that don’t need it, make sure the ones people want are in stock, available, and well designed enough to last. There are very few stores, even ones that capture my loyalty, that I can truly count on for a dependable product.

The other suggestion is about bringing decision-making closer to the retail floor. One lesson I’ve learned in the last three years is that not all chain locations are alike. In my new Pittsburgh suburb, the Panera is extraordinarily clean and always has at least two or three big sample trays heaping with bread or pastries, which the extremely solicitous workers encourage customers to take by the handful. It’s almost always packed with different sets of regulars throughout the day. Although the Panera here in Massachusetts is equally spotless, the workers are more of the bored college student variety and the sample trays are always empty. There’s the usual wireless crowd, but the real camaraderie takes place at the local coffee shops downtown.

Getting it right with customers at the local level is certainly a skill worth honing whether it’s bust or boom times. Implicit in Underhill’s message is the idea that retailers shouldn’t sacrifice creativity and innovation, but channel it in new directions. After all, I’d be much more willing to get back on the roller coaster if I was sure that after all the ups and downs, it was going to be good clean (maybe even safe?) fun.


C. B. Whittemore said...

Annie, thanks for mentioning Flooring The Consumer and referring to my most favorite retail anthropologist! Very interesting to read your examples illustrating Paco's points.

Annie said...

You're welcome. You have some great insights -- and I'm a sociologist who taught at Smith for 10 years, so I have an affinity for your approach!