Are Shifting Consumer Values Changing Retail?

Is it merely the weak economy that is changing consumer buying behavior, or is the shift due to something more fundamental to our values?

Recent retailing research is indicating that we are moving from “conspicuous consumption” to “calculated consumption”. The trend is that people are saving more and spending less; buying more with cash and less with credit. Smaller homes are gaining in popularity over “McMansions”. Conspicuous consumption is becoming passé, causing some high end shoppers to request unmarked brown bags for their merchandise instead of incurring the guilt of strolling down the avenue carrying Gucci and Armani-emblazoned bags. (It’s tough to enjoy being well-to-do when unemployment is high and people are being evicted from their foreclosed homes.)

People are clearly seeking more value and long-term satisfaction from their carefully-considered purchases. It’s more satisfying to have the experience of a cruise vacation than to cuddle up with a new fall wardrobe that will be out of fashion next season. Cooking lessons that enhance at-home dining have long-term payback. Seeing Paul McCartney in concert creates a memory that lasts a lifetime. “Staycations” can be very thrifty, and also conducive to family bonding. Activities that build relationships and cherished remembrances deliver more happiness than material possessions.

Assuming that consumers continue with this modified behavior, the challenge is on the table for retailers to create binding loyalty through experiential retailing and customer service. If people find out that they are happier spending this way, this shift may be permanent.

There’s an exciting opportunity for retailers to act on this trend and break away from the pack in terms of sales, loyalty, and profitability. Retailers that really know their customers and engage them in buying experiences that break the old-fashioned mold will be the big winners. When was the last time you saw an Apple store that wasn’t mobbed? Why does Sephora have department store cosmetic counters frantically re-tooling? Why do we shop at Whole Foods even though it’s more expensive?

Critical components of success in this new world:
• A brand identity that stirs the emotions of customers
• Unique offerings aimed with laser-like precision at target consumers
• Sophisticated integration between web sites and brick and mortar stores
• Strategic partnerships that deliver special experiences and exclusive products
• Responsive and interactive application of business intelligence
• Personalized customer service that binds us to brands and products

Acknowledgements: Thanks to Mary Gendron for posting the New York Times article that inspired this blog: http://www.nytimes.com/2010/08/08/business/08consume.html?_r=1