Why Marketers Must Change to Engage Today’s Shoppers

By Jeff Weidauer, vice president, Marketing, Vestcom International

While the retail sector hasn’t suffered as much as banks or auto companies, it has weathered some significant changes over the last 18 months. While many stores focused solely on price as a way to protect market share during the downturn, the resulting decline in revenue has fueled a mandate to find other attributes that will differentiate them from the competition. The good news is that retail—specifically the food, drug, and mass merchant segment—is seeing some light ahead.

The major changes taking place in the retail industry are gathered around this idea of differentiation; after years of homogenized and soulless stores that looked and felt alike, there are indications that retail is looking to break this pattern by focusing on the customer experience and building compelling offers designed to drive loyalty over the long term, rather than just going for short-term gains that dilute margins. These changes have their impetus in the growing power of the customer. Here is a look at several major trends:

1. It’s more than price. Anyone who thought the conversation—even in the midst of the worst economic climate since the Great Depression—was all about the lowest price learned the hard way that shoppers are looking for more. Historically, retail has made a big deal about low prices. Whether shoppers ever believed the various claims made is debatable; they do respond to price offers, but only temporarily, and with no long-term loyalty. Even so, shoppers want more than that. Price is important. But other things matter as well; things such as quality, service, and experience. This is truer with the Millennial generation than with the Baby Boomers, and since the Millennials are about to assume the role of the driving generational force, retailers need to pay attention. Price should not be a factor, which means it should be neither too low, nor too high. The Goldilocks rule applies here.
2. Private label is here to stay. Many of the national brands saw declines in sales because shoppers were flocking to private-label products and abandoning the so-called “name brand.” This has been the standard for decades: Private-label sales grow in down economies, and national brands pick back up when the outlook improves. But, as is so often the case, shoppers have reacted unpredictably this time.Store brands were growing and taking share from national brands beforethe downturn came along. And as value-oriented shoppers looked at private brands, the national brands pulled in their horns, cutting back on advertising and innovation, and did their best to wait it out. Only this time, shoppers aren’t coming back to the national brands like they have in the past. Store brands are no longer poor copies of the real thing. Today they offer exceptional value along with exceptional quality, and in many cases, unique attributes not available from the national brand. According to the Deloitte/Harrison Group 2010 American Pantry Study, 80 percent of shoppers believe that most store brands are manufactured by national brands, and 74 percent are more willing to try a private brand product than they were a year ago.
3. The customer is in charge. There has been an age-old tug-of-war between retailers and brands over who really rules the roost when it comes to the consumer. That argument has become irrelevant as the shopper has made her presence felt in new and important ways. There are more buying alternatives than ever before, all doing their best to entice and engage the shopper. Just a few years ago retailers assumed they could treat the customer like a captive audience and expect her to comply. Now she can—and will—switch stores or even go online. Technology has played a significant role in empowering the shopper.She is better informed, more cynical, and more willing than ever to take chances and try new alternatives to get what she wants. And if she isn’t satisfied, she may go public using social media to lodge her complaint, influencing her vast network. More than one brand and store have ignored the “mommy bloggers” and found themselves on the losing end of the argument.

These trends mean retailers need to throw out the old rule book and start rethinking their go-to-market strategies. We’re in the midst of a paradigm shift in retail, the likes of which we’ve never seen. All of us need to get a sharper focus, listen more closely, and treat the status quo as an anchor dragging us to the bottom.

In short, there has never been a more exciting time to be in the retail industry. Shoppers are taking the lead on change, and retailers need to be open to change if they want to stay relevant. The opportunities are there for those willing to make some big bets and take some risks. But if you’re waiting for things to get back to normal, welcome to the new normal.

Jeff Weidauer is vice president of Marketing for Vestcom International Inc., a provider of technological retail solutions based in Little Rock, AR. He can be reached at jweidauer@vestcom.com, or visit www.vestcom.com.