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Loading ...I received a call from a reporter Friday looking for comment about Aldi, a giant grocery chain of over 800 stores in the US with an average size of 17,000 sq. ft. They don’t take credit cards, no baggers, deli, flowers, etc. Oh yeah and no name brands – its all private label.
This flies in the face of stores like Safeway’s smaller footprint The Market that has only a handful of the best brands – at higher markups – in all categories. This allows them to add more profitable fresh fruits, prepared meals, expanded Deli and a Starbucks.
Here’s the kicker, after debuting nearly two years ago, The Market still only has one prototype in Long Beach, CA. Aldi is opening 100 in 2010 and even more in 2011. That got me to thinking, “Are Retailers Banking On America Becoming Poorer?”
Read any of the breathless articles on the Dollar Stores and their meteoric rise in stock price and you’re sure to receive the message that Americans are trading down. But are we doing less with less?
America’s retail was founded on aspirational shopping. We wanted things that meant we were better than the other guy or would make use feel smarter or would help us to appear who we perceived ourselves to be. That led to all the name brands’ marketing campaigns for new and improved-which often cost more.
Now brand names are selling off their unique selling propositions to compete with their own premium products as “private label.” Exact same PMS colors describe the product in such similar terms – who wouldn’t pick the private label?
Look no further than legendary detergent Tide. The Wall Street Journal reported last year that Tide Basic is currently for sale in about 100 stores throughout the South. It lacks some of the cleaning capabilities of the iconic brand — and costs about 20% less. You settle for less to receive less. Its very existence is one of the most telling signs to date of how mass marketers are trading down themselves.
Are we willing to settle for less? Less service? Less choice? Less aspiration? Does that make us feel better after working all day? And what does that do to our psyche?
OK rabid anti-capitalists – don’t flood me with your “of course we’re wrong.” I’m talking to the bulk of you working, shopping and living some form of American dream that I am. Yes its not what we were taught in the sixties but it is still founded on merch – creating and consuming a wide variety.
John Winthrop admonished the future Massachusetts Bay colonists that their new community would be a “shining city upon a hill,” watched by the world. Presidents Kennedy and Regan both quoted that term frequently to invoke pride and hope.
After 9/11, the housing bubble and recession, are we forever to be picking through generic “stuff?” Responsible to scan, pay and bag ourselves and leave feeling that we deserved the Yugo instead of the Lexus? And are retailers who dwell in the Rent-To-Own, Discount Dollars segment just riding a trend that could be ending or reinforcing our worst fears and reshaping retail?
And if we keep settling, how does that play out? For example in:
- Home Furnishings? “Get the vinyl floor, you don’t need tile.”
- Travel? Three stops on a cross country flight can make you dread coming home, even if you did get a great deal.
- Tourism? It’s a room by the elevators over the bar but you got a great deal.
- Apparel? “We make it to meet the price point, who cares if it shrinks after one wash.”
EBay and the rest continue to diminish expectations. Sorry, it’s used or a second, it’s not smart.
Will we become even more disaffected, depressed and unable to sleep as we settle for minimal experiences that reinforce a siege mentality?
What do you think? Are businesses banking on us becoming poorer?
Don’t forget: my new book The Retail Doctor’s Guide to Growing Your Business, a step-by-step approach to quickly diagnose, treat and cure (Wiley & Sons) in stores Monday, May 3.
Bob, there is one explanation that fits this change in the retail landscape.
There is a shift in the general tone of the population that has been 20 years in the making. Society tends to swing like a pendulum between two completely different mindsets… one of Civic, where everyone is more concerned with the “we” than the “me”, and one of Ideal where the “me” outshines the “we”.
According to those who have studied this shift, it takes 20 years for the pendulum to swing up to the peak of one of these mindsets and 20 years to shift back the other way. And this has been measured for a few centuries.
Supposedly we hit the peak of an Ideal generation back in 1983 and have slowly swung back towards the Civic. We passed into the Civic in 2003 and fully realized the mindset of the Civic generation in 2009. We’ll hit the peak of this mindset in 2023 and start swinging back to the Ideal.
What is most interesting is the peak years of each mindset.
Ideal – 1903 (Carnegie, Vanderbilt, larger-than-life icons) 1983 (James Bond – the swagger version, Rocky, Schwarzenager, Michael Jackson, Billy Graham)
Civic – 1783 (Revolutionary War), 1863 (Civil War), 1943 (World War II), 2023 ??
Some of what is going on in retail is that brands that scream “I’m somebody important” are no longer important. Brands that scream “I care about you” are the leaders in today’s mindset. And so are stores that truly act as though they care about you.
It will take some time to sort all this out, but the stores that prosper are the stores that embrace the “we” mindset.
Interesting point Phil but I’m not sure I catch you. Is the “we care about you” evident in the 99¢ store mentality? The “we” I’m concerned about is the one under seige like Spielberg’s refugee interpretation of War of the Worlds. If retail is “we care about you so we’re giving you less because you can’t afford it,” where is the aspiration to keep up with the Joneses or pull oneself up from their bootstraps or the best of a “good-better-best” product line?
Hi Bob, great thought-provoking article! When I look at consumer buying trends, I always look at the core emotions that make people buy a particular product/brand etc.
And I’m always listening to not just what they say about why they made a certain purchase, but how they feel about that purchase.
In the past 24 months, I’ve heard a lot of people talk about how they’ve reigned in their spending, are shopping at the dollar stores etc. They may even boast that they purchased “x” product for under $10-$20… but I never hear anyone talking about how good they feel about what they’ve bought or how how much they’re enjoying the lack of quality.
It’s like you said – retail has always been about aspirational shopping, often in our purchases we “buy” the person we want to be.
There are always exceptions to this of course, but for most people, they don’t set out in search of a poor quality, cheap product to buy.
I think that the trend we’re seeing in discount dollar stores will be short lived and people will be moving back up to their favorite shops as the economy rebounds and people are more relaxed about spending.
I do think that purchasing pre-owned products is a different social subject though – and isn’t motivated by the same reasons as ‘discount dollar’ purchases.
Pre-owned products have the added advantage of being eco-friendly, because they don’t require new resources to produce. So there is an added benefit to those kinds of purchases.
But that $5 plate that you buy at the $1 store probably cost 100 times that in carbon footprint – which ultimately is a huge cost to consumers.
Interesting side note on “dollar stores” – over the past several years, the dollar type stores have gotten more expensive and the quality of the products much worse.
I normally shop with local merchants or online, but stopped into a dollar store the other day because I happened to be right there – looking for party decorations for a school event for my kids. I knew this particular store used to have some good quality items… but I was stunned to see how expensive the items were – and the quality was horrible!
I ended up going back to our neighborhood store and found a much better selection/quality etc. and the products were priced comparatively.
So people need to be aware that just because it says “dollar store” or it’s cheap “brand x” doesn’t mean that you are getting the best value for money spent.
People really need to look at the product they are buying and what they are getting for their money. Value includes product quality, features, price and service.
Bob,
The dollar stores are making out right at the moment because of two factors – they are (perceptually) the opposite of the “look at me” brands that we are turning our backs on in this new mindset, and they are fitting a niche in this very tight economy. But they won’t have staying power as people realize some of the inherent problems so aptly described by Lisa – poor quality, no value, huge carbon imprint, etc.
But it’s no longer about good, better, best – or at least how those words used to be defined. While Good might simply mean it does what it should, Better now mean that it does what it should without using/wasting a lot of resources. Best might be all that and with a lower carbon footprint and sustainable production making it better for the planet as a whole.
Selling has changed, too. What you teach – about making the connection – is of even greater importance, especially when it is genuine. That is the transparency that we hear talked about so often. Being genuine, being honest, ethical and responsible are the new aspirations.
Exactly Phil – no wonder you and your store are such a success.