There are three types of shoppers in today's marketplace, according to one retail sales expert, and there are lessons to be learned from the insurance industry on how to not to deal with the most important class of them.
Darlene Quinn, a former senior executive with the Bullocks Wilshire department store chain, believes retailers need to work more on service and less on markdowns if they are going to ride out the economic storm.
According to Quinn, there are essentially three kinds of consumers in the mass market:
• Price Shoppers. These shoppers’ primary concern is the cost of goods. They are typically middle to lower middle class, blue-collar folks who have tight budgets, so they shop at discount big box stores like Wal-Mart.
• Luxury Shoppers. On the other extreme, this group has money regardless of the economic conditions. They summer in the Hamptons, and they buy luxury all the way in both goods and services. The recession doesn’t affect them any more than a stiff breeze. They’ll always buy what they want, when they want.
• Value Shoppers. In the middle is the “value” shopper, who is typically middle to upper middle class, and they didn’t mind paying a few extra dollars for extra service and better quality. However, she said this group has become price shoppers because of the recession.
As a response to the shift in value shoppers, retailers from all categories began working on cutting their prices. The problem is that strategy risks turning “value” goods into commodities, which makes price the primary feature of the products or services offered, flattening the playing field for competition. The result is that there are more losers than winners when value goods are commoditized—the consumers are the eventual losers.
“The insurance industry has already fallen down that slippery slope,” said Quinn. “Every TV ad you see is about how much you can save. Two years ago, insurance ads were more about service and security, but today it’s all about saving as much money on premiums as possible. The end result is that consumers now view insurance as a commodity, and the lowest price wins. The insurance companies will begin to cut service and customer care to pay for those rate slashes, and the post-recovery consumer will begin to wonder what happened to it.”
For true recovery to stick, retailers must take steps to maintain the integrity of value items and services, Quinn said.
