Tough times demand creative solutions
Jane Revell-Higgins T
alk about stating the obvious, I hear you say. With younger consumers facing rising living costs against a depressing background of less stable employment, pay
freezes, there’s the constant dread of an increase in interest rates. For our more mature customers, those same escalating living costs are outpacing pension values and the neglible interest from “nest egg” investments is hurting badly.
It is plainly horrible for individuals at both ends of the spectrum – and in the squeezed middle – meaning that few businesses have been unaffected as a result of this downturn.
These are very tough trading times indeed. Yet some businesses are flourishing in spite of, and in some cases, because of, these trends. For whilst the average consumer has acknowledged that less disposable income means they categorically must spend less, they do still need to make certain purchases and they certainly want to be able to.
What we’re seeing is much more thought going into buying decisions these days. Less impulse buying. Less extravagance. More discernment. More focus on getting the best value and quality for the spend. No one likes living in penury. Everyone wants to be able to buy what appeals to them. This has made the primary challenge for every direct commerce retailer, and high street retailer, for that matter, to extricate a share of the diminished spend. Branded products that once carried high margins are now reduced to mere commodities. One only has to look at the white-goods sector to see that it is now almost entirely price driven and that even web retailers with the lowest of low overheads are struggling to generate enough margin to be able to continue to trade profitably.
The evidence of the downturn is most visible in bricks and mortar retailing. The emergence of the value chains in wealthier regions and suburbs, in prime city locations where echoes of NIMBY cries have long since faded. Whether in Esher or Altrincham, Windsor or Knightsbridge, you are never that far away from a Poundland or a Poundstretcher,
an Aldi, an Iceland or a Lidl, a Matalan or a Primark. The sea change in the customer demographic shopping in those stores is astounding. Many continue to use the higher quality stores for the premium products they excel in, then buy the everyday branded products wherever they’re going to cost less, and switch to own-brand or unknown brand where the quality is equal or can be compromised. For those with the time to spare, there are good savings to be made by shopping around and going where the best offers are on a weekly basis. And let’s not forget the constantly extending ranges that our main supermarket chains are stocking these days. It obviously works, judging by the trolleys laden with groceries, clothing, gardens chairs and small electricals, not to mention toys, plants, BBQs… Having saved £xx on the toilet roll BOGOF, how many customers then splurge on items they didn’t set out to buy?
Do the consumers loading their trolleys with non-grocery products substitute these extra items for groceries they might have bought (but didn’t really need) or are they finding more to spend? Or is this money that they might have spent had they gone to a shopping centre or high street? Someone will have the answer to that.
Back to the shopping centre and high street, witness the speed with which mid-market retailers’ slower selling lines are marked down and cleared these days. Trip over the sale rail clutter in the prime front of store retail space. Witness the general lowering of prices which has come about as a result of the downward pressure on price driven by the value retailers and supermarkets. Whatever happened to the promise of quality and the brand trust that was built over decades?
Actually all of this creates the direct commerce business’ advantage, for whilst the vast majority of retail stores become harder to shop with all their clutter, messy displays and (desperate) screaming sale posters, the allure of the lifestyle catalogue and accompanying website is so much more
ecmod DIRECT COMMERCE YEAR BOOK 2011 4
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