September marked the fifth anniversary of what is widely considered the beginning of the Great Recession: the failure of Lehman Brothers. Although the economy was already on a downturn - shrinking at about 8 percent each quarter - it was this event that grabbed the headlines and set the overall economic tone for the following few years.
Recessions aren't new, but this one was different in that it went deeper and lasted longer than anything since the Great Depression. We are still arguably not out of the woods, economically speaking, and the ongoing ripple effects are being felt everywhere, including for food retailers.
The broken economy has had a significant impact on everyone, regardless of income level, but the middle class has possibly suffered the most. More people who saw themselves, perhaps aspirationally, as middle class are now giving up and accepting "poor" as an accurate descriptor. Upper-income people, while certainly better off, are backing off on spending and have tempered their lifestyles, as well, using smartphones to find the best deals and stocking up when they find them.
The Apple iPhone appeared in June 2007, just about a year before the wheels started to come off the wagon. Blackberry owned the mobile market, but quickly went from leader to loser, and most recently sold itself as a last-ditch effort to avoid bankruptcy. Since the iPhone's launch, smartphones have become the standard, outselling so-called feature phones five to one. Terms like "showrooming" and "selfie" have entered the lexicon as a result of the mobile transition from wireless phone to pocket-sized computer and communication device.
At the same time, consumers in general have become far more frugal, putting more time and thought into just about every purchase, from cars to cantaloupes. Google coined the term "ZMOT," or "zero moment of truth," to define the growing practice of pre-shopping research, once performed on a PC but now done mostly on smartphones, and increasingly in the aisles of a store.
For food retailers, what used to be a simple business is now anything but. Shopper marketing is the new black, and shopper engagement has become a necessity for survival. Added value is now cost of entry; shoppers want low prices, knowledgeable salespeople and a positive, customized experience that feels made for them, just like online. Brick-and-mortar stores need to be able to react to lower prices, whether down the street or across the country, while providing an engaging environment to shop in. They need to not only differentiate from the competitor across the street; they need to be better than Amazon or Overstock, offering advice and ideas, not just merchandise.
The game of retail has gotten exponentially tougher in the past five years, and the rules continue to change as shoppers gain more control over the experience. Clean stores, good prices and friendly smiles won't even get people in the door; consumers are looking for personalized value that is just for them, based on their needs, wants and lifestyles. They are also willing to trade personal information to get these bespoke offers.
Clear StrategyThe hardest part about picking where to focus is accepting the fact that focusing on one area means giving up on something. Ask a typical store operator about his or her target customer, and he most common answer is likely to be "everyone who eats." Nothing could be further from the truth. Although we all eat, what, how and when we eat are vastly different based on lifestage and lifestyle. For those retailers without a clear strategy and a database to mine for behaviors, the years ahead will be rocky at best, with "game over" the most likely outcome.
To survive in today's world, a clear strategy about the target market and a solid position in the mind of the consumer are mandatory. Although it's true that everyone eats, it's more critical than ever to have a laser focus on a specific target customer. With the apparent demise of the middle class, retailers will need to decide to go hard-discount or high-end; trying to capture the shrinking middle is akin to chasing one's shadow.
Despite numerous predictions that brick-and-mortar stores are going the way of the dinosaur, it's likely that they will be around for many years to come. Consumers like choice, and while going online serves a purpose, being able to see and feel products, not to mention engage in the experience, also have their benefits. Even same-day shipping and free returns aren't likely to end the existence of retail stores, at least not soon.
But the herd is definitely going to continue to thin out. Only those players that can meet and exceed shopper expectations will prosper; all others will exit one way or another. As the millennials enter the mainstream and takeover for the boomers, the pace of change will only accelerate. Shopping isn't what it was five years ago; for businesses still running like it's 2008, using the same success criteria and the same approach, it's time to regroup, rethink and re-engage if they want to be here five years from now.
Jeff Weidauer is vice president of marketing at Vestcom, the leading provider of customized shelf-edge communication for the retail industry, driving sales and reducing costs for the nation's top retailers and their suppliers. Mr. Weidauer can be reached at jweidauer@vestcom.com or 501.663.0100.
