Solving the customer partnership puzzle - The Customer Connection

Discount Store News, May 6, 1996

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The difficulty is not in defining the issues bedeviling the disgruntled American consumer. The challenge is untangling them. Offering shoppers from dual-wage-earner households prepared meals to go is as much a matter of meeting demands for convenience as it is an added-value service. Setting up card-swipe payment stations at checkouts not only saves harried customers time, it leverages technology in a way that lends a contemporary, "with it" image to the store's nameplate. Making associates available to walk wary shoppers to the far end of the parking lot touches on issues of security as well as one-on-one customer service.

The happy news is that innovative programs--and sometimes just good old-fashioned customer hand holding--can kill more than one bird with a single stone. The more unsettling news is that there are an awful lot of birds to kill.

American consumers want it all: a greater selection of every type of merchandise available in a single stop, but in stores that aren't so cavernous that shoppers need a map and a guide dog to find their way to the paper towel section; the excitement of fresh merchandise; the reliability of consistent merchandise; and, of course, the lowest possible prices on merchandise of the highest possible quality.

As though those challenges aren't enough, the faceless creature known as the American shopping public keeps changing shape. The Baby Boom generation, once a reliably spend-crazy monolith, over the next two decades will throw a mighty kink into the economic cycle. In the first decade of the new century, the number of Americans over age 50 will be double its current size, and by 2030, Americans over age 65 will represent an unprecedented 20% of the population. Today's Generation Xers and their children will be working awfully hard to put money into a benefits system that will have a disproportionate number of dollars sucked out of it by a much larger block of the population.

The Baby Boomers have, in fact, already started withdrawing their money from the marketplace and feeding more of their earnings into savings and investments than at any time since the beginning of the postwar period. Members of the younger groups are following their lead--to the extent that 70% of Americans are now holding at least some of their money for a rainy day.

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Studies conducted by Roper Starch showed that consumers' monthly savings climbed 25% from 1991, when the mean household savings was $118 per month, to 1995, when it was $148.

Similarly, the percentage of households that had no discretionary income to disperse at the end of the month leapt from 8% in 1991 and 1993 to 15% in 1995. While the total amount of discretionary income across all groups increased from $258 per month in 1991 to $275 per month in 1995, the gain was a modest 6%.

Among those who do have money left over after paying the bills and feeding the passbook, the bulk of households surveyed reported spending up to $229 (discretionary) per month. However, the size of that group dropped from 44% in 1991 to 34% in 1995. And the more generous spenders among them--those who seeded the economy with $200 to $299 (discretionary) per month--declined significantly. Their ranks shrank from 19% of the overall group in 1991 to just 10% in 1995.

But people are still spending money, and according to the Roper research, spending a bit more of it. Against the 25% increase in monthly savings, the Roper survey found that:

* Spending on videos and recorded music increased 30%.

* Spending on clothing for children was up 29.6%.

* Travel and weekend getaway spending increased 23.5%.

* Spending on goods for the home increased 22%.

* Spending on movies, concerts and sports events increased 16.5%.

* Spending on meals outside the home increased 16%.

* Spending on clothing for adults was up 11.5%.

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The catch is that the spending is being done more cautiously and at fewer outlets. Each dollar spent on "frivolous things" is increasingly viewed as "spending my future freedom," according to a Salomon Bros. report on consumer attitudes released earlier this year. Other research has demonstrated that consumers have pared down their shopping destinations to a couple of serviceable favorites, leaving trips for other destinations for the odd special occasions.

And discounters are particularly vulnerable in this area. Roper Starch data shows that discount stores command loyalty from just 22% of consumers--the lowest loyalty rate among the five channels surveyed (department stores, discounters, c-stores, drugstores and grocery chains). In many cases, a discounter's proximity to a shopper's primary destination drives the decision to stop and shop, and 42% of consumers polled by Roper said that they chose a discount store simply because its the nearest one to home.

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While overall convenience plays a heavy role in shaping the choice of retail outlets, variety of merchandise is an almost equal lure (40%). The decisive factor is price (60%).