New Year Brings Price Wars
There's been a great deal of talk about the resurgence of consumer spending, and for good reason. Many retailers went on record to declare this past holiday season the best ever. That doesn't happen unless individuals are feeling more comfortable about their income prospects in 2011.
Having said that, I'd advise marketers to take a deep breath before declaring the good times are back. A soft job market combined with the inability for buyers to access credit means that consumers, while spending more, will still look hard for good bargains before shelling out greenbacks. This is even true for the younger generation that historically has had more disposable income.
A recent Chase Slate/U.S. News survey noted that 18-year-old to 34-year-olds are more committed to saving money and decreasing spending this year than those in any other age group. Make no mistake, 2011 will remain a challenging one for retailers and product marketers.
What Buyers Seek
Plan on seeing smarter buyers than ever before. Thanks to continual access to competitive data, more intelligent buyers will come into your store or log on to your website. They'll do so armed with pricing and availability of rival products and services. They'll even go as far as to walk into your store, take a picture of a particular product on your shelf using Goggles mobile search app, then find a better price and purchase it online — all before walking out your front door. What's more, high-tech gadgets won't be the only items impacted. Virtually every product or service will see increased pressures on price and availability. The bottom line is that consumers are looking for the best bargains. As a result, price wars will ignite.
Case in point: The college textbook marketplace has turned upside down in a matter of months. Such offerings used to be only available at the university bookstore, where schools and publishers could command high prices and profits by mandating their products be used for certain classes. Students and parents were forced to spend nearly as much on textbooks as they were for tuition in some cases.
That's no longer the case as startup companies have begun offering the same books online for pennies on the dollar. These retailers even give students the opportunity to rent their textbooks. The result is that prices are falling dramatically, upsetting the entire industry.
Another example can be found in how traditional department stores are reaching consumers. With large shopping malls giving up even more ground to e-commerce sites, long-established brick-and-mortar outlet J.C. Penney created a Facebook store, where consumers can shop in a manner better suited to their lifestyle, competing directly on price and availability with the Amazon's of the world. J.C. Penney won't be the only one for sure.
The same can be said in the consumer electronics arena, where competition for the same consumer is fiercer than ever. Wal-Mart, Target and Costco now go head-to-head with Best Buy for customer wallet share, with less distinction between which of these outlets has the best quality offerings at the most competitive prices. Keep in mind, these trends are just the beginning.
What Marketers Can Do
Companies can no longer tout exclusive brands, high quality and best prices thinking those traits alone will draw new customers and market share. Such characteristics are commonplace, and are the bare minimum consumers expect from any provider. In turn, marketers must pay even more attention to the customer experience, including how easy they enable consumers to purchase what they want and support them when they ask for it.
Differentiation will come from things like how easy it is for someone to get free shipping, how quickly will someone respond to their question via online chat or how long they have to return a product to get a full refund. Now more than ever, a product manufacturer or retailer's value proposition must extend beyond the widget and MSRP, and more toward how well they treat consumers when they come in contact with them — be it on their website, Facebook page, in-store or over the phone. This is where real gains will be made this year and subsequent years.
Bobby Brannigan is the founder and CEO of ValoreBooks, an online retailer that sells, rents and buys college textbooks. Bobby can be reached at bbrannigan@valorebooks.com.
