There was an interesting story in the USAToday a few weeks back about the lingering effects of the recession on consumer spending – and how that is translating to purchases made at retail. (You can find the whole story here - http://tinyurl.com/y6ktotz.) The author details how retailers and restaurants with a “high price reputation” like Whole Foods, Starbucks, Morton’s Steakhouse and others are now offering discounted goods and talking them up.
According to marketing research firm NPD Group, 48% percent of customers bought products on deal three years ago. Now it is up to 53%! A bit more starting, and closer to home in the retail world, three years ago five in ten shoppers shopped in discount or off-price stores. Now it is up to nearly seven in ten. Wow – a huge increase and not in a direction that helps natural products retailers.
A possible outcome of what has been called “the great recession” is that a focus on deals and discounts will last long after the recession is over. Even though there have been several economic indicators that the recession may be easing, one doesn’t have to look far to see the recent stock market volatility and the uptick in a still high unemployment rate to make have evidence to make the case that the recession is not going away quickly and quietly.
These changes in shopping behavior are not surprising given the tough times, but what do they portend for the independent retailer when the recession finally leaves?
The other article was actually a compendium of data from U.S. Energy Information Administration. (Yes – we have one of those!) The data was about the annual miles driven by passenger cars in the U.S. From 2005 to 2007 there was a slight decrease every year. It was nothing major with the average over that time dropping just over 200 miles per car. However, in 2008, the last full year for which there is data, the average plunged 600 miles per car. The rate of decline over one year was three times what it had been over the previous three.
If people are driving less – and still needing the same staples to live – they are going to be changing their shopping habits. The easiest change is to be going to stores that allow them to combine several shopping trips into one – and that also is not good news for specialty retailers who carry unique items with limited retail distribution. (Or for retailers who sell high priced, “small cube” items that can be found on the internet.) Yes – I am painting a picture of a natural products retailer.
Those of you that know me, either via personal association or from the seminars or workshops that I conduct, know that I am a positive, optimistic person and a big believer in the independent retailer. I am not sharing this data to scare, but to inform, so that smart retailers can take action and thrive.
The “answer” to both these stories is not in trying to fight a discount fight. Specialty retailers simply don’t have the resources to fight that kind of fight.
The “answer” is to ensure that your store is offering value. Why would people spend money at your store, even in tough times? Because you are offering selection, staffing and service that helps them get the products that they need. Why would people make an extra trip and drive to your store? Again, your selection, your staff and your service. They gain from not only what you sell, but from how you sell it.
This research came about as I am preparing for a seminar at the Natural Products Association’s Natural Marketplace show in Las Vegas next month. (Check out all of the show details at www.naturalmarketplaceshow.com.) New Hope Natural Media, the publisher of Natural Foods Merchandiser is honored to partner with the NPA to produce this great event!
I will be on a panel discussing “Retail Strategies for a New Decade” on Thursday, June 10th as a part of the Retail Intensive Education program. Jay Jacobowitz of Retail Insights, Matt Murray of Green Acres Natural Foods Market, and Tom Sokoloff of Paradise Health Foods will be a part of this panel as we explore what has happened to open this new century and what we see in store for the next decade. I expect there to be many great insights and thoughts shared during our presentation – and during entire retail education program. If you are planning on being at the show, I hope to see you there. If this show is not on your plans, check it out! There is still time for you to register and to plan to join us!