There has been a radical shift in consumer purchase
behavior this year, with many consumers trading down from SUVs to
economy cars, from designer labels to private labels and to discount
stores from higher-end retailers. A combination of high gas prices,
higher food prices, falling home values, tighter credit and falling
stock prices have led to a significant drop in consumer spending for
the first time in many years, according to a recent Wall Street
Journal article. "Consumers are moving from availability to
affordability," noted Thom Blischok of Information Resources, Inc.,
which tracks consumer spending. The WSJ story also reported that
consumer confidence has dropped 38 percent since its peak in January
2007, with 57 percent of consumers stating in an annual survey that
their financial situation had worsened, the highest figure since the
survey began in 1946.
WHO BENEFITS?
The radical downward shift
in consumer spending has benefited Wal-Mart and discount stores such
as Dollar General and Family Dollar Stores, which have experienced
increases in sales this year. American car manufacturers have been
particularly hard hit by consumers' rapid move to smaller cars from
gas-guzzling SUVs, with both Ford and GM posting record losses.
However, Japanese car manufacturers Toyota and Honda have seen
gains, at least with certain key vehicle models. The Toyota Corolla
has become the best-selling car in the U.S., surpassing Ford's F-150
pickup.
ADAPTING TO THE CHANGING CONSUMER
Several
trends are emerging in terms of consumer purchase patterns. They are
doing more one-stop shopping--for example, buying groceries only
once a week to save on gas, buying in bulk, using more coupons,
buying more affordably priced items that appeal to convenience
versus value and buying more private label store brands than
name-brand products.
As noted in the WSJ article, retailers are reacting
to these changes by discontinuing products that don't have mass
appeal, building smaller stores that stock fewer products to cut
overhead and improve margins, stocking stores with more multi-pack
items at the start of the month when consumers are paid and then
stocking more individual items at the end of the month, when budgets
are tighter. Savvy marketers are developing products that appeal to
these new trends in consumer purchase behavior. For example, some
are offering lower-priced versions of premium products--and stocking
it next to the premium product--in hopes of influencing consumers
not to switch to another brand.
Retailers and product marketers who don't adapt
quickly to this radical shift in consumer purchase behavior will
find themselves at a severe disadvantage versus their competitors.
For example, Sears and Kmart saw their sales fall simply because
they were not stocking the type of merchandise that consumers
wanted. In contrast, Wal-Mart was able to refine their merchandise
mix and have seen sales increase. Staying a step ahead of the
competition is more important than ever to survive in today's
challenging retail environment.
Peter Koeppel is president of Koeppel Direct
Inc., a full-service media buying agency based in Dallas. He can be
reached at (972) 732-6110, or via e-mail at pkoeppel@koeppelinc.com.
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