PERSPECTIVES

From The Co-Founders

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Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

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Consumer Confidence Dropped. Now What?

As we follow economic indicators that particularly affect retailers, our primary focus always is consumer confidence. And the reports coming out this week give us pause. 

  • "The Consumer Sentiment Index fell by 13.5% from July, to a level that was just below the April 2020 low of 71.8," notes Richard Curtin, chief economist for the University of Michigan's Surveys of Consumers.*
     
  • "The extraordinary surge in negative economic assessments reflects an emotional response, mainly from dashed hopes that the pandemic would soon end."

The highly transmissible Delta variant and the vaccine hesitancy of many have changed the momentum. Covid fatigue is back. This affects consumers. 

And with it, more challenges for retailers. Decisions and policies may be needed regarding vaccinations, both for your staff and your shoppers. Meanwhile, consumers are likely taking another pause. Will schools reopen? Will offices reopen? 

So, what's a retailer to do? What you always do: deal with it! 

The advantage that independent retailers have is that you can move and adjust very quickly, being responsive to your local market. The Big Guys can't do this as well as you.

For instance, as you and your buyers review and adjust your buying plans, here are some reminders to keep in mind:

  • To avoid being stuck with too much seasonal merchandise after Labor Day, start now to focus on markdowns. 
     
  • Remember the various online wholesale marketplaces that emerged and came to prominence during the pandemic. While some of them are featuring more major brands, they still offer access to many smaller vendors who can deliver smaller quantities in faster times, particularly of more unique product. 

Most important, review our "Rethinking Your Merchandise Mix" (see chart above)

  • Give some careful analysis to the proportions of "Basic", "Expanded Basic" and "Discretionary" merchandise in your stores now.
  • Especially as you prepare orders for Holiday, Basics and Expanded Basics should predominate.
  • Be very disciplined about Discretionary merchandise (and again, explore the online marketplaces for much of that.) 

As you know, retailing never has been a "set it and forget it" operation. Instead, it demands your constant attention and especially, your resilience. But it does reward those who are steadfast about maintaining their flexibility. 

One final thought: Be prepared to bounce back in another direction.  

As Curtin observed, "In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism."

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* Preliminary Results for August 2021, Surveys of Consumers chief economist Richard Curtin, University of Michigan.

Related Articles

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    Consumer Confidence Up Smartly, But...

    • "Consumer confidence rose sharply for a second straight month, hitting the highest level since the pandemic began," according to the Conference Board Consumer Confidence Index. 
       
    • "Economists believe that the rising consumer confidence will bolster overall economic growth as consumers, who account for 70% of economic activity, step up their spending as lockdown restrictions are eased." *

    This is welcome news for many retailers, as consumer confidence has been a key leading indicator of retail sales.

    However, a note of caution: retail sales are not the sole component of consumer spending.

    • "As more businesses and cities reopen, consumers will have even more places to spend the savings they've accumulated during the pandemic." **
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    Increased Consumer Spending...on What?

    Spring is in the air.  More places are lifting Covid restrictions. Daylight savings time starts this coming Sunday, extending the evening hours. 

    And, for the first time in years, we can expect to celebrate Easter, Mother's Day, Father's Day, graduations, weddings with few restrictions. All promise a renewed air of celebration! 

    There is widespread anticipation that consumer spending will be very strong. But...spending on what? Before you place all those merchandise orders, consider this.

    • We expect that the second quarter burst of consumer spending will be weighted towards services more than consumer goods. A big surprise for many.
       
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    What to Expect This Holiday Season...and From Whom?

    "Consumer confidence rises to five month high."

    That headline from Chain Store Age* brings smiles to retailers.

    Consumer confidence is a key indicator of retail sales, and this increasing confidence as we head into the holiday season is very welcome indeed. 

    • “Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year,” according to Lynn Franco, senior director of economic indicators at The Conference Board.
       
    • "Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022," added Franco.

    But of course, there is no one-size-fits-all upside here. 

    More Spending on Necessities

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    What is "Value" for Your Customers?

    What is the definition of "value" for customers? Pretty straightforward, actually.

    • Value = benefits received for the burdens endured.

    Wait. What? "Benefits received?" "Burdens endured?"

    Turns out, the only single answer to "What is value?" is, "It depends." 

    Don't just roll your eyes. What constitutes value for your customers increasingly is a make-or-break part of retailing. 

  • Who's Buying What's Selling, And Where?!

    It's a given that your sales volume is a very big deal. Granted, you are analyzing it every day. But here's a slightly different approach which you may find very revealing.

    Let's start with a couple truisms. The definition of retailing is “selling to the ultimate consumer.” 

    Retailing also is having "the right product at the right price at the right place at the right time for the right customer."

    But, as retailers ponder how best to manage sales in the current consumer environment, does it really matter whether their "right customers" buy from them in-store or online? 

    Actually, it might! And here’s a simple, free "pilot project" to find out a little more.

    Customer Analysis Tally Sheet

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    Not Just WHETHER to Re-Open. WHAT to Re-Open?

    Some thoughts from Nordstrom leadership that are spot on!

    • “We started this company from scratch, so what would we want to be, knowing what we know now? It’s clear we can expect a new normal. And it's up to us to decide what that will look like. We're each being presented with the unique opportunity to create a future worth envisioning.”

    That's what Nordstrom President and Chief Brand Officer Pete Nordstrom told Puget Sound Business Journal columnist Patti Payne on April 23, 2020.

    And what he succinctly stated is exactly the challenge – and opportunity – that is confronting all retail owners. 

    In order to answer whether you should re-open once you can, you first must be very confident in WHAT kind of retail operation you will be re-opening.

    The only certainty of the aftermath of the pandemic is that everything will be different. Given that, what better time to re-imagine your business?



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