Getting into the hearts and minds of consumers and defining core motivators for purchase is more important than ever.Â This week in Los Angeles Envirosell presented â€œThe science of Shopping Conference 2009.â€ Envirosell researchers and consultants from several regions including Brazil, Russia, China and India presented in-depth looks into psyche of customers across the globe and how the economy is affecting the current state of retail.
Paco Underhill, Founder and President of Envirosell (and a superstar in the retail industry), shared his insight into major retail trends, issues, and opportunities of this economy. According to Underhill there has been a fundamental paradigm shift–and the art of consumption is changing.Â
Underhill segmented US consumers in to three groups, describing the first group as the third of the population thatâ€™s at risk of being downwardly mobile; This group is only buying the essentials which has resulted in uber-discounts thriving. The second group knows someone close to them who is at risk, and is uncertain of the future; this group celebrates how little they spend. The third group was described as the individuals with acquired wealth and no debt who are redefining luxury as spending time with grand kids vs. acquiring a second or third home. The days of extravagant consumption are over; itâ€™s just considered bad manners. Paco warned, â€œWe are in for some wrenching times.â€Â But he offered recommendations for retailers to survive these shifting behaviors, including:
- Revisit Format – The time of the big box is overâ€”a large foot print does not translate to more money. More concentrated centers earn more per sq. ft. â€“retailers can share space with new tenants or add second door for new retail service formats.
- Repurpose vacant stores: By May there will be 20-30% vacancy of retail real estate. 50% in some places now, with Las Vegas experiencing around 60% vacancy. Think of new and creative was to repurpose vacant traditional retail environments.
- Donâ€™t get lost in technology â€“ collecting data today is easy; make sure itâ€™s applicable. Mr. Underhill says he screens technology opportunities by asking the question, â€œwill a female use itâ€ Women were the first adaptors of laptops and ATMs.
- And, be careful to cater to the local taste â€“ trends happen locally, and manifest globally.
Many marketers and retails want to know, â€œWhen will this end?â€
Guest speaker Wendy Lieban from WSL Strategic Retail says â€œNever.â€
According to Liebman, the world of shopping has changed. The consumerâ€™s mindset is not that of a happy shopper after eight years of chaos. Between the gas price roller coasters, Katrina, 9/11, political and corporate scandals, product recalls, war and mortgage market collapse, consumers donâ€™t trust anyone. But they have learned how to deal with it. They are a smarter shopper now; they are cautious and not sure of the future.
WSL research found that 80% of the people say they donâ€™t want to shop for anything they donâ€™t really need–even prescription drugs are being reconsidered. 54% said they avoid going to stores where they know they tend to overspend, choosing to avoid temptation all together. They are looking more at DIY.Â 69% make more meals at home, 64% cutting back services, 47% are doing more around the hose rather than paying someone else to do it.
However, Lieban provided some valuable insights on how to survive and thrive in crisis:
- Know your shopperâ€¦ This goes way beyond transaction behavior. Itâ€™s about who they are. CRM data, Understand their shopping behavior in the context of their life.
- Embrace the new retail worldâ€¦ Offer more options such as pop-up stores, automated vending machines, and mobile shopping – 14% of consumers bought clothing or accessories on their mobile phone in the last 3 months.
- Resurgence of the second hand market â€“ From salvage grocers to premium vintage clothing. See this as opportunity just as much as competition.
- Keep in the store, keep them in the band. The new generation expects â€œâ€their wayâ€ provide options for personal control, customization and personalization. Give them options. Good, better, best and explain the reasons and points of difference that enable them to make an informed decision. According to WSL research 58% feel proud of the little ways they find to save money. They are proud of being a smart shopper. Give them permission to use less or trade down within the brand, and communicate the true value.
- Be where they want youâ€¦ reach them where they are. Online, mobile, special events. Take your message and your products to where they are. Partner with other retailers. These times have created strange bedfellows, as in the case of JC Penny distributing coupons for a free 7-11 cup of coffee and 7-11 providing $10 off coupons for JC Pennyâ€™s to their customers.
Lieban is hopeful we will come out of it, but cautions that things will be different. We cannot expect shoppers to go back to the way they were before.
Above all, Underhill and Liebman emphasized that brands must listen to their customers and use the research the gather to inform their retail spaces. Especially in a down economy, consumers are more discerning than everâ€”and brands must respond by raising the bar in retail.