There have been a number of reports suggesting customer behaviour is changing, and that this is not a temporary change, but more likely a permanent change.
Permanent changes could cause problems if you don’t adapt.
Three changes keep being mentioned: increased saving, what they buy, and how they buy.
It is more than just a slowdown in sales. Thrift is in; people are saving much more than they have in the past and seeking to get rid of debt. In turn value for money is becoming more important. Neither businesses nor consumers can afford to be indulgent.
That is also reflected in a change in buying patterns, what they buy, and how they buy.
Whether it is three years of depressed economic activity kicked off by the Global Financial Crisis (GFC), the on-going uncertainty about Europe’s ability to pull itself out of their quagmire, or doubts about the US economy reviving, people seem uncertain about the future.
A recent newspaper report suggested that Australian retailers have been forced to extend their summer clearance sales, as shoppers have left them with piles of unsold stock.
And people are responding to uncertainty with thrift, both on a personal and a business level. Australia's savings rate is at a two-decade high, due to consumers remaining fearful over the future of the global economy.
Yesterday's demand-driven economies, which relied upon easy debt to inflate assets and drive business growth as well as consumption, have ended.
What does this mean for you? You can’t rely on the market growing for your growth, unless you are in one of the resource rich areas. Growth will require competing successfully more than ever. You can’t rely on your customers, whether they be public or businesses, having unlimited access to credit to keep buying.
Australian National Retailers Association chief executive Margy Osmond was quoted as suggesting retailers would need to adapt to a new consumer environment. "We're dealing with a changed paradigm, where the vast bulk of people will only shop if they see it as a value proposition.”
You can bet businesses will be taking the same approach.
Underneath this is a dramatic change in customer behaviour. It is not just that people are increasingly buying on line (and that is not just the public – I have industrial clients who think nothing of buying equipment on E Bay) it is what influences their buying decisions.
A survey produced earlier this year by IBM’s Institute for Business Value, which covered 30,624 consumers in 13 countries, including more than 2,200 consumers in Australia, The survey says over 20 per cent of respondents said they regularly bought clothing, groceries, consumer electronics and personal care products for their parents.
It is also how customers use social media to make buying decisions. Customers engage in a constant and instant dialogue with each other. They discuss their interests and their experiences with different retailers, products and brands. These online conversations and consumer-generated content are rich sources of information for purchasing decisions.
And it is not just that they are saving rather than buying, or buying online rather than in bricks and mortar businesses, it is what they are buying.
So essentials are still in but luxuries are out (look at what is happening with Australia’s upmarket retailers such as David Jones and Myers, with the same trend reported overseas). People are still eating out (looking for an escape experience?) but are looking for home entertainment.
But it is the business buyer that I suspect interests most of you. Bank credit is limited and hard to get, particularly for small businesses so the value equation is particularly important. What they buy from you must deliver results.
Gordon Grossman, former head of marketing The Reader’s Digest is quoted as saying “If your customer won’t make you rich, who will?” The reality of business life is that a business only exists as long as customers buy from them.
According to an article in Internet Retailer, nearly 4 out of 5 households earning $100,000 a year or more said they are cutting back their spending.
When customers cut back spending, your business can take a real hit - especially if you sell a product that's "nice to have" vs. one that customers absolutely must have.
While there is uncertainty customers are going to be hard to come by. So what can you do to maintain healthy sales during what has already been a prolonged recession and is likely to continue for some time?
In your next blog I’ll examine the positive steps you can take.
The offer I made last year in my f*ree special report “How to uncover the profits hidden in your business” will be coming to an end shortly. In the report give two case studies where clients have uncovered hidden profits in their businesses, profits which were leaking away instead of flowing into their bank accounts.
And I look at some of the tools and techniques I used to uncover the profits and plug the leaks and suggest more than 27 areas you should work on to transform your business.
You can access the special report here - http://www.profitsleakdetective.com/special-report-uncover-the-profits.
I’ll let you know shortly when the special offer is ending.
© Copyright 2012 Adam Gordon, Profits Leak Detective
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?