When the economy falters, consumers close their wallets and forgo or delay some purchases. The fine line that exists between necessity and indulgence becomes much more defined. Retailers cannot afford to stand pat and take a beating. They generally look at all phases of their operations for ways to survive an economic downturn. Most often they slim down, shut unprofitable stores, trim inventory and payroll, and modify their product mix all in hopes of enduring the pain of inflation and recession.
With the fear that the coming months could be the toughest since the 1991 recession, retailers are fighting to gain any edge possible over their rivals and cushion themselves from the slide in consumer spending. Some are redeploying staff and revising promotions, while others are putting a new emphasis on low pricing and discounts. Most often, the prospects for success depend on how vulnerable they were in the first place. Here are some of the more visible ways retailers can try to ease the pain of a consumer slowdown in spending:
Merchandising. Having the correct amount of a product to match consumer demand is almost mandatory. Shortening the time to resupply from weeks to days — or even hours — is essential to take advantage of spikes in consumer demand and reduce shrink and markdowns.
Pricing. Avoid across-the-board markdowns or discounts to maximize revenue and profit potential. Product-specific discounts and targeted, time-sensitive promotions are much more effective in generating consumer spending enthusiasm during tough times. Coupons can also take a new significance with those who previously ignored them.
Consumer input. Waiting until after the season ends to determine which trends and products were most popular will only lead to unacceptable markdowns, shrink and unsaleable inventory. Using consumer research, websites and polling to gather near real-time consumer opinion can increase the number of “home run” products you offer.
Promotions. Having the best products, pricing, discounts and promotions are ineffective if no ones knows about them. Also, in tough times, consumer loyalty can take a back seat to savings and convenience. Promote what you and your products have to offer to both your existing customer base and any potential customers. Many potential customers who perceive a new need to save may be ready to switch loyalties or even trade down to mid-level retailers.
Having the right product at the right price and at the right time takes on a new and more important meaning during these tough economic times.