retail news in context, analysis with attitude

Interesting analysis in the Minnesota Star Tribune about the impact of the current economic decline on how people shop for food. The paper notes that many believed that consumers looking to save money would simply eat out less and spend more of their money at supermarkets for eat-at-home meals … and that price increases at retail would be absorbed by these shoppers without too much resistance, mostly because they pale compared those occurring in restaurants.

But it hasn’t happened that way. As consumer prices have increased - five percent in the past year – “in response, people are buying cheaper, generic products instead of the more expensive national brands. They're also buying more items on sale, and using more coupons,” the Star Tribune writes.

This “trading down” means that retailers are having to focus more on value brands and private label products – and companies ranging from Supervalu to Safeway to Costco are warning financial analysts that they will not be meeting expected and projected profit numbers for the year.

KC's View:
I continue to believe that even as retailers shift their focus to products that seem more appropriate to a recession-minded consumer base, it will still be the products and services that differentiate them – not just their prices – that will prove to be the long-term key to viability. After all, even when people have less money to spend they don't lose their aspirations…and good retailers will figure out how to speak to those aspirations while keeping issues like value in balance. Not easy, but retailing isn’t for the weak of heart.

In an interview with the Star Tribune, Supervalu CEO Jeff Noddle said this week that “the company is working more closely with food manufacturers to design innovative promotions and coupons. However, he said that foodmakers are struggling with higher commodity costs and also are pressuring retailers to show better results. At the same time, Noddle made it clear that he won't allow current economic constraints and a recent slowdown in Supervalu's sales growth to disrupt the company's long-term strategy.”

There are tactics and there are strategies. The tactics have to serve the strategies. This seems to be what Noddle is saying, and it makes sense.