Mintel Reveals How to Get Ahead in Retail

At a Mintel webinar held last week (March 09), entitled “Keeping Up and Getting Ahead in the ‘New Normal’ Economy,” Mintel’s senior research analyst Marcia Mogelonsky, Ph.D., revealed the bottom line for retailers in these tough economic times: Retailers need to do more than change the way they do business; they need to change the way they connect with and respond to consumers. They have to understand how consumers feel, she added, because “that’s the only way to succeed.”

Domino Effect
The current economic situation is very scary, admitted Mogelonsky. There’s been a domino effect of negatives brought about by a series of events that include the housing bubble burst, bank failures and the auto industry bubble burst. Each of these in turn impacted other areas of the economy, she explained. For example, the bursting of the housing bubble also affected construction and the sale of new major appliances and home furnishings. Then there’s what Mintel calls the “Trailing Dominoes” — the luxury goods, vacations, hotels, restaurant dining and gifts — on which consumers have cut back their spending.

Understanding the Consumer Blues
Inflation is up, unemployment is up and, more importantly, said Mogelonsky, consumer confidence is down. What does consumer confidence mean? Things are so scary out there, that some people are concerned about keeping a roof over their heads, she noted. And many more people are afraid that they won’t be able to maintain the standard of living to which they have become accustomed. As evidence of the dire state of consumer confidence, Mogelonsky explained that she had led the same Mintel webinar a little more than two weeks ago. At the time, the consumer confidence index was at an all-time low. However, last week, when she repeated her presentation, consumer confidence had fallen even lower.

Consumers Still Buying, But Differently
In December, Mintel asked consumers what changes they were going to make as a result of the economy. The biggest change was that 22 percent said they were going to look for a more economical way to eat out. Mogelonsky emphasized that they didn’t say they were going to stop going out to eat altogether, but only that they would find a way of doing it more economically. What’s more, Mintel’s research found that while consumers are experiencing a fair amount of financial stress, there hasn’t been “a unilateral pullback from shopping” either.

Success and Understanding
Mogelonsky examined several successful companies in the current economic climate. American Italian Pasta, whose shares were up last year, and Green Mountain Coffee Roasters, which is also doing well, were two companies she profiled. While American Italian Pasta is one of the country’s biggest producers of pasta, it almost went bankrupt three or four years ago when low-carb diets were all the rage, she noted. Mintel found that consumers perceive dry pasta as an economical choice; and with more people eating at home, American Italian Pasta is once again successful.

As for Green Mountain Coffee — a small, gourmet coffee company — its success is due to several factors. Mintel research found that 41 percent of consumers said they were brewing coffee at home because of the cost, and 47 percent said they were drinking more coffee at home now. Gourmet coffee at home becomes the perfect compromise for consumers who have given up their morning cup from their local coffee shop.

Today, success comes specifically to those companies that offer products and services at an affordable price, said Mogelonsky, who named the “three essential attributes” of success: Quality, Creativity and Trust. Examples of companies that deliver value and quality, she says, are Hershey’s, McDonald’s and Campbell’s Soup. One example of a creative company is Kellogg’s, she said, citing its new cereal boxes that feature a reduction in packaging, making them more environmentally friendly and easier to manage — for retailers and consumers alike — because they take up less room.

When it comes to trust, says Mogelonsky, consumers want to know the core values of a company. They want to know that the company is in it for the long haul. They need to trust that a company will provide value and quality, and help them to get through these tough times.

Trading Up, Down and Over
One major trend, says Mintel is “trading up, down and over.” Consumers are seeking balance, noted Mogelonsky. Many are cutting back in one area to better afford another. For example, a couple may decide not to go to an expensive restaurant on their anniversary, but instead will spend a fortune on a celebratory dinner at home. In light of this trend, retailers may want to show customers how to create the restaurant-style meal at home. Meanwhile, another consumer might put off buying a new car, but will upgrade the sound system in his or her existing car as an alternative.

As part of the trade-off trend, Mintel forecasts increases in sales of at-home foods, especially those that help make “meals.” Breakfast items will also be big, it predicts, as breakfast is one of the first restaurant meals consumers cut to save money. Mintel also forecasts a rise in sales of “fun foods” for movie nights at home. In research conducted in December 2008, Mintel found that 36 percent of respondents said they spent less time going to the movies.

The Urge to Give
People want to give to charities, says Mintel, but it’s becoming increasingly difficult in this economy. Giving locally is especially important. Retailers who want to give consumers more reasons to shop their store may want to tie the sale of certain goods and services to a local charity or school. When the economy turns around, predicts Mogelonsky, consumers will remember that you helped them continue to give to important causes when they couldn’t afford to do it without your help. For more information about Mintel, visit www.mintel.com.