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In the first of a two-part article, the folks from The Hartman Group offer a look at the consumer and wellness trends that will have an impact on retailers and manufacturers in the coming year.

    With 2003 well on its way, we still see many of the influencers of the past year. Though 9/11's impact sits farther back in our minds, the fundamental shift that followed in the days, weeks and months after the attacks still reside, exemplified by a deepening of values and a desire for simplicity.

    As this shift in consumer behavior continues, here are a few other trends we see shaping up in 2003:

    The Price is Right.

    Continuing Price Elasticity in Niche-Market Spaces. After traveling around the country for the past year talking to consumers of all persuasions, our most consistent, powerful finding is that fiscal instability is not leading to heightened price sensitivities in the specialty retail sector. To be certain, while some consumers may have less money to spend all around, said cash flow shortcomings do not appear to be significantly altering retail shopping behavior for those retailers offering added value via experience and community. In short, consumers are frequenting high-margin, niche-market, specialty retailers in the same proportions as before the perceived economic slowdown.

    The Battle for the Lowest Price. We will see this initially in terms of an increase in price wars between conventional retailers that will eventually lead to the expansion of Wal-Mart and dollar stores at the expense of everyone else trying to compete on price. We've already seen this happen with the mass discount stores and have seen the beginnings of this with grocery stores. Expect to see the process continue in grocery. At the same time, expect to see a counter-trend develop in which everything but price is manipulated, as retailers attempt to carve out a space that differentiates themselves from Wal-Mart. This will lead to some innovative successes and some creative failures, but the end result will be a widening gap between the (relatively) pricey retailers valued by consumers and the rock-bottom price retailers that consumers currently love. The middle ground will continue to give way to these two extremes (much like the income distribution). Specifically, all this will take the form of:

    Intensification of the price wars
    Extension of these price wars from mass discount and grocery to other channels
    Further differentiation of retailers unable or unwilling to compete solely on price with the consequent increase in prices for their wares
    Disappearance of many mid-priced goods and services and the retailers that concentrate on them, to be replaced with higher priced private label brands at one end and inexpensive commoditized brands at the other.

    Keeping it Local. Keeping it Real.

    The Local Store. Retail grocery stores found 2002 the year to get local. In this past year, we've seen stores like Albertson's make significant shifts in how they do business at the local store. Currently large chains are learning that they need to cater to the local market; therefore, more stores are offering products as well as store formats to meet the local needs.

    The Local Connection. More consumers will flock to farmers' markets or local produce stands. Buying local in 2003 will become as important as products like organic in that the significance of "local" is that it represents similar values to where your customers live, work and play. Buying local gives them the direct link to extend and expand into their own community, empowering them and giving them the sense of belonging. It also reverberates the experiential nature of the community with the immediate and impactful realization that they're involved. Finally, it reinforces the idea that the grocery store is "their store" -- their own personal space -- where they can participate and join in their neighborhood environment, where they, in turn, leave their own thumbprint. This relationship is realized not just in the layout and space of the physical store, but the products and services themselves become an experience of their own local community.

    Coming Thursday: “The Transformation of Organic from Specialty to Ordinary,” and C-stores Get The Wellness Gospel.

    For more information, check out The Hartman Group at
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