Consumers are Changing, but are Retailers?

Posted by truecreek on November 3, 2009 under More Dam News | Be the First to Comment

In wake of recession, consumers look for value, focus on essentials.

By Allison Linn

The recession has dramatically changed many Americans’ shopaholic habits, at least temporarily and perhaps forever.

Now the question is whether the nation’s retailers have kept up.

shopping bags“The answer is no,” said Marshal Cohen, chief industry analyst with NPD Group.

He’s not alone in that assessment.

Although it’s still early days of the holiday shopping season, some analysts are already worried that too many merchants are taking a business-as-usual approach to an era that is anything but usual. Any miscalculation could be disastrous for retailers, who typically expect up to 20 percent of annual sales and a bigger share of annual profits during the critical holiday season.

“Retailers still don’t have a full grasp of reality,” said Burt P. Flickinger III, managing director of  Strategic Resource Group, a consulting firm.

Flickinger thinks many of the nation’s retail executives don’t completely understand how severely the Great Recession has affected the millions of Americans who have lost jobs, had their wages cut or are living in fear of a job loss.

That, he noted, is on top of other financial concerns many Americans are facing, including a steep drop in home and investment values.

Retailers have good reason to fear such financial jitters, having only last year endured a disastrous season in which holiday retail sales fell 3.4 percent as Americans, rattled by the financial crisis, held onto their pocketbooks.

This year, Flickinger said, consumers are facing the reality of a sky-high unemployment rate and growing concerns about credit card debt.

“Shoppers are more scared going into this holiday season than any time in the last 50 years,” he said.

In the new era of tight budgets, consumers are looking for good value on the items they want and need. But instead, many analysts say retailers seem to be taking a different approach: offering ever-more extreme discounts on items they want to get rid of.

The super-low price method of offloading excess inventory has become so commonplace, even among higher-end retailers, that shoppers are coming to the conclusion that many products are just worth less, said brand analyst Robert Passikoff.

“It isn’t just that you learned that there will be sales — there will always be sales — but what it’s done is it ultimately affects the value perception of the product,” said Passikoff, president of the customer loyalty research firm Brand Keys.

More here.

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