Store shifting presents golden opportunity to retailers

Posted by Daniel Palmer on 14th August 2008

The NPD Group, Inc., a leading market research company, has discovered American consumers are gradually becoming more willing to change their purchase behaviour and shift from their regular shopping stores as the credit crunch takes its toll.
In July, 34 per cent of consumers stated they would not change their purchase behaviour; down from April when 42 per cent suggested they would do nothing different. “This 8 point drop represents billions of dollars in sales that are not being injected into the normal shopping sectors for consumers,” said Marshal Cohen, Chief Industry Analyst, The NPD Group, Inc.

Another shift worth noting is where consumers plan to shop. In July, 41 per cent of consumers stated that economic conditions would not affect where they shop, down from 44 per cent in April. “This would suggest that we are starting to see signs that consumers are store and channel shifting,” added Cohen. “And it represents a huge opportunity for many retailers. Now is the time of year to make those all important ‘introductions’ to new customers and make overtures to an established customer base. We will see which retailers know how to make new friends and hold on to their old ones.”

The impact of the credit crunch and higher fuel prices has been greater in the US than Australia, to-date, but, despite the prospect of lower interest rates, food retail in Australia is likely to find turbulence in the coming six-twelve months. Though, despite high costs and low confidence, the current situation does provide retailers with a great opportunity for further growth. Customer loyalty tends to be at its strongest in periods of economic prosperity and, consequently, if retailers can ride out the current difficult conditions and manage to maintain or even grow their customer base then they will reap great reward as soon as the downturn concludes.
In the US, for example, the high number of closures of casual dining restaurants has offered competitors the chance to gain market share and capitalise when economic optimism returns. Food industry consultants Technomic believe differentiation has proven the difference between success and failure. “In terms of achieving differentiation, it’s hard to underestimate the importance of the food element,” says Ron Paul, President of Technomic. “Consumers are naturally drawn to unique, signature menu items. When the chain can also layer in excitement through new or limited-time offerings, they help create an environment where consumers want to come back. A good experience can generate all-important buzz around the concept.”

Factors dictating success, according to Technomic, include: strong unit economics, excellent execution in food quality and service, and the ability to convey a strong price/value perception with consumers, regardless of the total amount spent.