Economic Downturn Reshaping Consumer Values

LOS ANGELES Consumers will emerge from the current period of economic challenges and a possible recession with a different set of values, and retailers must prepare in advance to accommodate those changes, an executive of TNS Retail Forward said here last week at the firm's 2008 Strategic Outlook Conference. Dan Stanek, executive vice president of the Columbus, Ohio-based market research company,

LOS ANGELES — Consumers will emerge from the current period of economic challenges and a possible recession with a different set of values, and retailers must prepare in advance to accommodate those changes, an executive of TNS Retail Forward said here last week at the firm's 2008 Strategic Outlook Conference.

Dan Stanek, executive vice president of the Columbus, Ohio-based market research company, said some customers who are trading down to other formats may never come back to the supermarkets, “while those who do will come back with changed values and expectations and new ways of thinking and shopping.

“Over the next three to five years, spending will involve muddling through as people try to reduce debt, which will affect their discretionary spending. Some markets will be squeezed, and while many middle-income shoppers will come back as the economy recovers, they will be more cautious about credit and debt.”

He urged retailers and CPG companies not to stop advertising despite the down economy. “Don't give up promoting, because those that advertise through the recession are likely to come out on top when it's over,” he said.

The post-recession consumer will expect business to meet a new set of values, Stanek said.

“We're going into an unprecedented era where the past can serve only as a guide,” he explained. “We're about to see a whole new breed of consumers with unique values, and if you understand them and address them today, you will position yourself for the long term.”

In another presentation, Lois Huff, senior vice president, said the outlook for retailers in general looks bleak through at least 2010, and it may be a few more years after that before most supermarkets are able to experience real growth.

“Store closings will be up 25% in 2009, and I expect many retailers [in various industries] will declare bankruptcy or go into liquidity early next year,” Huff said.

Clubs and supercenters are likely to continue to be the leading growth channels for food, she noted, but supermarkets and drug stores will continue to struggle with the prospect of ongoing high inflation and no growth for a longer period, she predicted.

Many consumers have already changed some of the ways they shop, and businesses are making adjustments, according to James Marstiller, senior vice president. “You've got to ask yourself what's working, and then decide what you should do.”

What some food retailers are doing to benefit from changing trends, Marstiller said, include:

  • Stressing value. “You must rethink what everyone knows,” he said. “Good values help shoppers get more for their money.”

    As an example, he cited the introduction by Whole Foods Market, Austin, Texas, of a “value guru” at every store to conduct tours and to point out specials, private-label prices and bulk buys “to let consumers know the chain offers ways to live well on a budget, despite its reputation for high prices.”

  • Rethinking what “competition” means by looking for opportunities to sell or lease programs that are working to other retailers, he said — as Safeway, Pleasanton, Calif., is doing by offering Eating Right and O Organics beyond its own stores to other retailers around the U.S. and globally; as Hannaford Bros., Scarborough, Maine, is doing by licensing its Guiding Star program to other chains; and as Giant Eagle, Pittsburgh, is with its fuelperks! program.

    That program was rewarding Giant Eagle customers who spent more in-store with discounts at the chain's gas pump, Marstiller explained. Now the chain has created fuelperks.com [4], where it's linked its stores with 500 retailers of various sorts so customers who purchase from any of the merchants can earn gas discounts at Giant Eagle.

  • Pursuing consumer relationship marketing, as Kroger Co., Cincinnati, has done in partnership with Dunnhumby “to develop a loyalty-card program that leverages shopper insights to drive quantifiable results,” he explained.

  • Thinking “green.” TNS research indicates 53% of shoppers are willing to pay for eco-friendliness, Marstiller noted.

  • Going “local,” as Whole Foods has done at a new store in Venice, Calif., which carries a broad assortment of local produce; features a wall mural by a local artist; and offers space inside the store for local artists, jewelers and designers to sell their goods.

In another presentation, Mary Brett Whitfield, senior vice president at TNS, talked about the importance for all retailers to take a multichannel approach to promotions.

While “multichannel” once referred only to stores, catalogs and a website, it now encompasses “a bigger, broader brand presence, including new communications outlets and touchpoints,” including social networking pages, videos, widgets and mobile phone marketing, she explained.

Whitfield urged retailers to be “channel agnostics” by making it equally easy to shop through all channels, as Giant Eagle does on its website by allowing consumers to look at a flier and simply click on items they want to add to their shopping list.