Is the longest, consumer-led economic expansion in U.S. history running out of steam?
Maybe it is. Economies are cyclical. That said, reports of approaching economic decline might be greatly exaggerated. The U.S. consumer is still buying things, see strong retail sales numbers this summer.
MillerZell follows the debate and measures the indicators, just as you do. We’ve weathered seven such economic downturns during our more than a half-century of delivering retail solutions to our clients.
It’s not helpful to be overly optimistic or pessimistic. A measured, purposeful and strategic evaluation of where your business stands in the current as well as the future economic climate makes the most sense.
But hit the pause button on those efforts for a moment and ask yourself this: How might the perception of an oncoming recession as well as a recession itself affect your customers?
Consider this: a recent study by Oracle found that “73 percent of retail executives believe that the overall environment in retail stores has become more inviting in the past 5 years. Only 45 percent of consumers agree, with 19 percent stating it has become less inviting.”
Yikes. And this is customer thinking during an economic surge.
Taking a customer-first perspective opens up plenty of avenues worthy of exploration. Such as:
- How might your customers alter their view of your brand and the experience they have in your stores?
- How will their needs change? And how might you be able to help?
- Is there something that could be done during the downturn that would attract new customers?
- How might you differentiate yourself to customers from your competition?
- Who are the most profitable customers that you don’t have but could acquire?
- Where do you see the opportunities with your customers after a recession?
Where should you start?
It makes sense to audit your management of the 2007-09 “Great Recession” and get a sense for what worked and what didn’t. But a lot has changed over the past decade. It’s vital to understand the rapidly evolving marketplace and customer.
Fewer customers are brand loyal than in the past, and retailers are vulnerable to losing shoppers when they don’t offer fresh, interesting experiences.
Nielsen’s Global Consumer Loyalty Survey revealed that only about eight percent of U.S. consumers said they are brand loyal. Moreover, this survey reflects the thinking of confident consumers. During a downturn, the competition to present value and outstanding experiences to less confident customers will intensify.
The shopper journey also is much different than in 2007, when few actively used their phones to analyze choices, prices and buying/delivery options. Harmonizing all channels for customers obsessing about value amid economic uncertainty will be critical.
Further, a downturn is no time to skimp on store development and strategy. As previously noted, already there is a disconnect between what retailers believe about their customers and what customers actually think.
So postponing new investments while anticipating a potential drop in sales and revenue could mean continuing or creating a disconnect with your loyal and potential customers.
While it’s wise to contain costs, it’s also unwise to damage your brand, risk customer loyalty and ignore opportunities for long term growth.
Yes, you need a keener eye for what creates value in your stores when you’re not awash in growing revenue. That emphasis on discernment should always be a part of the process. But it shouldn’t come at the expense of seeking innovations that provide return on investment and strengthen your market position.
Bold decisions don’t always pay off, but thoughtfully conceived bold decisions often do.