That’s a comment from Leonard Stiff, a chef-caterer quoted in Business Week in yet another article trying to gauge how consumers are reacting to the ongoing recession. Mr. Stiff sums up what, to me, seems like the best philosophy for both the average citizen and the average retail company. The question, of course, is how to be smart -- and indeed, the best way to do so: let customers know you think they're savvy.
Business Week’s summary points to the obvious: people are still buying enough items to keep Wal-Mart and the various incarnations of the Dollar Store afloat. At the same time, they are certainly searching for bargains and coupons, passing information along to their friends via email. And finally, the news that retailers keep staring at, like the deer in the proverbial headlights: people are making immediate cutbacks and trade offs, while postponing certain kinds of purchases indefinitely. As we've already pointed out, generics and in-house premium lines are also making a dent in brand loyalty.
Speaking with Kai Ryssdal on Marketplace, Buyology author Martin Lindstrom summed up the crisis:
“We will see that this Christmas is probably going to be the worst in 24 years. And I think the main reason why is because the first time ever we are realizing this is serious stuff. This time it's almost like we got a slap on the chin. And with that slap on the chin….. people wake up and they start to say, "Hey, I have to buy stuff differently." And what happens is people literally change stores, people literally change the path down the supermarket aisle. And they have never done that before, but that is the change we are facing right now, and retailers are realizing that."The Center for Media Research offers some nice recent data about what people are doing these days when they go to the mall: they’re still going, as I’ve pointed out, but they’re not frequenting department stores as much and they’re not venturing too far off the beaten path. The most common comment I’ve heard, both in person and in the news, has been “no more retail therapy for me.”
So how can retailers react to the slap on the chin? From watching shoppers since mid-September, I have some tentative but I think fairly obvious conclusions:
- One, people will limit their purchases to items that "matter more," both for everyday needs and for long term use.
- Two, people will be deciding more carefully exactly what "matters more" and using new criteria to decide what’s worth the money. (My prediction: "green" and "healthy" will hold steady).
- Three, there will be even more market segmentation: some people will be frugal because they have to be and it will be a new experience and a struggle; some people will be frugal because it’s tacky to spend when others are suffering and, well, let’s be clear: no one knows how long this will last. Others will continue to spend, but in patterns that will, at first, be unrecognizable according to current market logic.
- Four, while consumers may be enticed by bargains, expect them to bring a whole new wealth of knowledge (from word-of-mouth, social media, and general on-line sources) to their in-store decision making.