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The New Economy - How to connect with consumers and
get your fair share
All signs point to the fact that we’re entering a New Economy. This New Economy is driven by the combination of consumers’ power, the volatility of the stock market, the global economy, the changing political landscape, intense media coverage, and the way we examine and analyze all of this. The New Economy will create The New Retail.
As Fourth Quarter/Holiday 2007 left us, we saw retailers feeling the influence of and shift toward the New Economy. Consumers were clearly conditioned to wait for discounts and to be a bit frugal. But most of all, they were challenged to find new and exciting merchandise to purchase.
We can learn much from Holiday 2007. Here’s my favorite example: GPS systems. They were one of the hottest-selling products of the holiday season. Were they new? No. But they felt new to consumers because they were a key item used as a lure through deep discounts. How could anyone resist? NPD data shows Holiday 2007 GPS sales (dollar volume) increased 170 percent over holiday 2006.
This lure-by-discount formula has set the tone for the New Economy. Already immersed in sale after sale, consumers are programmed to scour the Internet or circulars looking for deals. They know there’s no reason to pay full price when they can wait a few days and shop on sale, and they can uncover great deals from the comfort of their couches and computers. Lure-by-discount is being used to drive traffic to retailers’ stores and Web sites. To be sure, stores may be trying to not be ‘on sale’ every day of the week. But by using the Internet and circulars, they can directly and conveniently communicate to consumers their everyday values and special discounts.
The prospect of buying at discount will be even more appealing as confidence in the economy wanes. In a recent NPD study, 43 percent of respondents said they feel we are in tough economic times; 36 percent said we are heading toward tough economic times. When asked about the impact of media coverage on their perceptions of the U.S. economy, 69 percent said the media has had an impact on their perception of the economy. So with the intense focus on our economy, and with election-year politics heating up, the media and politics both will play roles in the New Economy and the New Retail.
That leads to the second big retail story of 2008. The government recently announced a "stimulus package" that offers tax-rebate checks to qualifying taxpayers. Forty-two percent of consumers in a recent NPD study told us they expect to pay down their debt with the rebate check. Whether consumers pay debts or purchase new televisions or spring clothing with these checks, they’ll think they’re doing the patriotic thing, stimulating the economy. And they may make room for new purchases, ones for which there’s pent-up demand after months of scaling back on spending. Even more frugal consumers may give in to a yearning to shop and reward themselves.
No matter what you think about this economic stimulus, you should make plans now to encourage consumers to spend on your products or in your establishments. One approach is to try to convince consumers they can get more for their rebate bucks by spending in your stores or restaurants. Or you can offer greater value by allowing consumers to cash their rebate checks with you – $800 worth of product for your $600 check, for example. You could suggest a formula for spending rebate dollars: use part to pay off bills, part to pay utilities, and part to purchase your must-have products or services.
You could also offer special sale days right as the rebate checks hit the consumers’ hands. Remember what we said about the effectiveness of lure-by-discount: It was an effective formula at Holiday 2007, and it should work well now, too. How about "Stimulus Check Week" or "Christmas in May?" Smart marketers will pull out all the stops with door-buster specials, extended hours, check-cashing options, added-value incentives, special pricing, and wardrobe sales (the more you spend the more you save). Don’t forget the power of Web sites and circulars in capturing consumers’ attention.
So get to know the New Economy – make plans now to get your fair share. Understand where you fit in to this new spending environment, and you’ll be prepared to weather the storm many analysts and media pundits predict.