As recession wears on, value is back in vogue
Every eight years or so I dust off a photo from a nearly 30-year-old annual report of the Dayton Hudson Corp., predecessor of Target Corp. The photo, shown below my picture this month, is of an amber neon sign inside one of the company’s department stores. The simple, one word sign reads: Value.
Every time the country falls into a recession, retailers remind themselves that value, like cream, rises to the top of the shopper’s list of attributes when they choose which stores to patronize. Not that merchants ignore value during flush times. But when wallets are fat and ready for easy pickin’, too many retailers gloss over some essential basics.
I’m reminded of this truism by my personal shopping experience this past weekend. I needed some basic merchandise. Two OTC products, some diet soda, sugar-free candy, some aluminum foil. Wal-Mart or Target were my options. They are positioned across the street from each other in downtown White Plains, N.Y. Access would be from a paid parking garage adjacent to either store. I chose Wal-Mart. Why? Because Wal-Mart comped my parking. Target would not.
Now, $2 for parking is not going to send me to the poorhouse. But just as e-retailers have found that free shipping is more of a sales builder than almost any other promotion they can run, the prospect of saving $2 for parking can weigh heavily on a shopper’s psyche. Little things count and add up.
I used to be the retail industry’s best friend. Not because I work for a retail industry publication. Rather, because I spent where and when on what I wanted.
No more. Now my purchases are measured against reality. Weekends no longer are for expeditions to the mall. I know I should be spending. It’s everyone’s patriotic duty to spend our way out of this recession. But I just can’t bring myself to buy more. Even when I promise to clear my closet of an equal number of items for every new one purchased and donate the used clothing to the needy, I can’t bring myself to unsheathe my plastic.
I am not alone. The Commerce Department reported in early February that for six straight months personal spending deteriorated, while over the last three months of 2008 the personal savings rate climbed to its highest level in six years.
“Value trumps price,” a headline from page 11 of this issue reports. A survey by Brand Keys found that during a recession, consumers place more emphasis on value when expressing brand loyalty. In the value equation, price, it seems, matters less during times of deep discounting.
Retailers need to think like customers and also be creative. Value can be found outside of the attributes of the products people buy. It can be in a validated parking sticker. Or from a store associate who packs the weekly groceries in a customer’s car. Or in shuttle service to and from outlying portions of a big-box or mall parking lot.
Korean car maker Hyundai’s buyer assurance program offers to buy back an automobile if the purchaser loses their income. The always promotional JoS. A. Bank Clothiers has adapted this idea with a “Risk Free Suit program.” If a customer buys a suit from March 16 through April 9 and involuntarily loses his job between April 16 and July 1, JoS. A. Bank will rebate the cost of the suit, up to $199. And the customer may keep the suit so he can “be dressed appropriately as he meets with his next employer,” said R. Neal Black, CEO of JoS. A. Bank. Is the program gimmicky? A public relations stunt? Perhaps. But it also reflects an awareness that consumers are reluctant to spend, and that anything that provides assurance adds value.
Brown named to PepsiCo board
PURCHASE, N.Y. PepsiCo announced the election of Shona Brown to its board of directors.
Brown is SVP business operations of Google, a position she has held since 2006. From 2003 to 2006 she served as VP business operations of Google, where she led internal business operations and people operations.
NPD: Teen music spending down in ’08
PORT WASHINGTON, N.Y. According to The NPD Group, a leader in market research for the entertainment industry, teens (age 13 to 17) acquired 19% less music in 2008 than they did in 2007. CD purchasing declined 26% and paid digital downloads fell 13% compared with the prior year.
In the case of paid digital downloads, 32% of teens purchasing less digital music expressed discontent with the music that was available for purchase, while 23% claimed to already have a suitable collection of digital music. Twenty-four percent of teens also cited cutbacks in overall entertainment spending as a reason for buying fewer downloads.
The downturn in paid music acquisition was matched by a downturn in the quantity of tracks downloaded from peer-to-peer (P2P) networks, which fell 6% in 2008. The number of teens borrowing music, either to rip to a computer or burn to a CD, fell by 28%.
“While we expected to see the continued decline in CD purchasing among teens in NPD’s music tracking surveys, it was surprising to see that fewer teens downloaded music from P2P sites or borrowed them from friends,” said Russ Crupnick, entertainment industry analyst for The NPD Group. “These declines could be happening due to a lack of excitement among teens about the music available, but it could also reflect a larger shift in the ways teens interact with music, given that so much music is now available whenever and wherever they want it.”