Feb. 9 2010
By Stevan Buxbaum
From www.chainstoreage.com
As I walked through a major American mall over the holidays, I was reminded of “The Emperor’s New Clothes” by Hans Christian Anderson. Everywhere I looked, it seemed there was a poster declaring “50% to 70% off!” or announcing some other dramatic discount worthy of a fire sale. At what point, I wondered, will retailers start asking themselves, “50% off of what?”
Since the onset of the recession, U.S. retail chains have done a great job of slashing their inventories and tightening their operations. And they certainly cannot be blamed for seizing the theme of value and holding on for dear life. But, unfortunately, the “discounts” so many stores are trumpeting these days have about as much substance as the invisible suit of clothes in Anderson’s short story.
Those discounts, after all, are based on the collective memory of a time when full price, along with home values, credit-card limits, retirement accounts and family incomes, was far higher than it is today. Posters advertising clearance-sale discounts, in other words, are more about the irrationally exuberant past than the economically moribund present. Deep discounts are the new full price.
In this environment, which I think of as “the new normal,” everything must reset. And that includes our psychological and emotional expectations regarding economic growth and productivity. Those who have lost their jobs or seen their home equity or retirement savings wiped out have already had their inner “reset button” firmly pressed by circumstances well beyond their control. They are fully awake to the reality that the U.S. economy will not return to the frothiness of 2006 and 2007 anytime soon.
For the rest of us, the task is to fully embrace this new normal and let go of any unrealistic expectations, as well as the opposite extremes of bitterness about our losses or nostalgia for what we might still regard as better times. Doing so will allow us to focus more intently on the very real opportunities available to us today. At a time when nearly every storefront is papered over with markdown posters, for example, promotional strategies based on more of the same just won’t cut it. The winners clearly will be those retailers that can retool their brand identities and convey their value offerings via smart and engaging ad campaigns, not those that can shout “value!” with the loudest voice.
In the best-selling book “A Whole New Mind: Why Right Brainers Will Rule the World,” Daniel H. Pink points to the importance of story in selling products to 21st-century consumers who long for meaning and transcendence. How many retailers have made the leap from run-of-the-mill messaging (“Here comes another clearance sale!”) to an approach in which the realities of the new normal are integrated into their very DNA? How many chains have thought long and hard enough about the full range of implications for the retail industry of a true end to over-consumption? It is not that Americans will cease to be avid consumers; we still love to buy. The question is how to provide people with the types of products they truly appreciate, want and need at a time when mindless consumption simply isn’t possible anymore.
Where fire sales are short-term events, the aforementioned challenges must be pondered over the long-term. Those who cling to the notion of a pending reemergence of the “old normal” are unlikely to engage in such an effort. Meanwhile, their more pragmatic and realistic competitors stand to profit from that misstep. And make no mistake about it -- the imperative is indeed to take these realities seriously by recognizing the likelihood, if not certainty, of their longevity.
White-collar knowledge workers are still losing their jobs to engineers, accountants and computer programmers overseas, and many observers believe this trend will only accelerate. Automation continues to enable companies of all types to trim operating costs, but only by slashing their payrolls in the bargain. The typical warehouse today is run, not by armies of forklift drivers, inventory-control specialists and dock workers, but by computer-controlled conveyer systems wired to RFID. Manufacturing might have a few bright spots, but it still mostly happens in China. Even if the longed-for recovery dawns sooner rather than later, then, the United States will still face serious underemployment challenges for years to come.
When we walk through the mall next holiday season, will we be bombarded yet again with competing discount signs in all directions? Or will we find, instead, that consumers are making a beeline for those stores and brands that have been inventive enough (and Pink would even say empathic enough) to find ways to sell products -- and tell stories -- that are most resonant with the new normal? Retailers are pretty savvy, and my guess is that many are already thinking along these lines.
Stevan Buxbaum is executive VP at consultants Buxbaum Group, Agoura Hills, Calif.
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