Chief Retail Advisor
The broader U.S. economy may not be in a recession, but many consumers are experiencing their own economic downturns. The needs and expectations of budget-conscious consumers are evolving, and retailers and manufacturers need to acknowledge the shifting patterns of consumer behavior and adapt their strategies accordingly, in order to remain relevant in the current market.
Rising Price Ripple Effects
Rising prices in one area can cause ripple effects across other sectors, leading to a pullback in consumer spending. As the cost of food and other essentials continues to rise, discretionary spending takes a hit. Consumers have also become more deliberate in their purchasing decisions, shying away from the impulsive purchases that are a significant source of growth for many retailers. Just as people are keeping their vehicles longer, the lifespan of many other products is being extended as consumers are maximizing usage until the very end. Finally, the declining importance of secondary holidays, like Easter and Father’s Day, that emerged in 2022 has continued. Consumers still acknowledge these occasions, but the scale and nature of related spending have shifted.
Deliver Need, Value, and Exclusivity
Now is the time to get back to basics in terms of marketing products. Retailers and manufacturers need to help consumers recognize the value of their products, and the roles those products play in solving their specific needs. They must demonstrate the value proposition of products by offering competitive pricing, discounts, or bundled deals that resonate with cost-conscious consumers. Providing tangible benefits, such as extended warranties, loyalty programs, or free servicing, can also enhance the perceived value of product offerings. Finally, it’s important to make products seem exclusive, scarce, and harder to find elsewhere. This strategy generates a sense of urgency, compelling consumers to act quickly to secure what they want. Limited-edition releases, unique collaborations, and personalized experiences can help instill this perception.
The spending pie has gotten smaller, but the competition remains the same, which means smaller revenue slices — unless you take action to make your slice bigger. Retailers and manufacturers can position themselves for success during the ongoing consumer recession in the U.S. with awareness, acknowledgement, and action.