The era of conspicuous consumption is over. Retail sales growth is expected to remain flat this year, a drop from 1.7 percent in 2008, according to market research firm Retail Forward. In a recent survey of 4,000 primary household shoppers in the United States, 69 percent of the respondents indicated they have changed their shopping behaviors because of the sluggish economy.1 How will this affect the future of retailing? Based on a report on future retailing trends, recession-related shopping behaviors are likely to remain unchanged, even when the downturn ends.2
It’s no surprise that families are feeling the crunch. With rising unemployment, a depressed housing market, a still-recovering stock market, and tightening household budgets, consumers are buying only the essentials and are using any excess cash to pay down debt. According to the survey, among consumers likely to continue these shopping behaviors as the economy improves, 49 percent look for sales and deals, and 46 percent buy only what they truly need. Forty percent are using more coupons than before, and 15 percent are buying in bulk. Clearly, in a recession, many shoppers are making do with less or going without.
Most consumers claim that their current recession-related shopping behaviors will continue as the economy improves.
As these behaviors are likely to persist even post recession, retailers are preparing themselves for the end of long-term retail cycles. The “here-today, gone-today” short-term, trend-based retailing cycles will prevail, and they will be coupled with a conscious consumerism bred during the downturn.
The report details a number of other retailing trends influenced by the recession:
Smaller is better Retailers likely will downsize everything—from packaging and store spaces to retail chains and growth expectations. Consumers will have less money to spend and will spend that money more wisely. In fact, 35 percent of consumers are doing more comparison shopping before purchasing a product than they did prior to the downturn. Because of that, retailers may want to think twice about how they stock their stores. For example, specialty chain stores might be better off in smaller spaces offering fewer product choices as more shoppers become more discerning because of the downturn.
Lifestyle retailing Retailers will be defining themselves less by the products they sell and more by their ability to support the lifestyles of the customers they serve. This might mean tailoring product offerings to customer segments, simplifying choices, and providing targeted do-it-for-me services. And since about half of all shoppers are currently buying only what they need and searching for deals, then retailers will be focused on providing a more wallet-friendly shopping experience.
Suppliers defend turf Store closings, buyouts, and retail consolidation will continue to characterize the retail industry, sharply reducing the number of distribution points for many brands and increasing brand competition on the retail floor. Many suppliers will continue to focus on innovative distribution strategies. For example, one specialty denim brand that was sold in upscale department stores is now being distributed exclusively through a teen clothing store under a multiple-year agreement.
Economic projections suggest that retail sales growth will rebound in 2010. Whether or not that actually occurs, retailers are preparing for a changing consumer mind-set that will impact retail trends.