The New Consumer Minimalism
Natural~Specialty Foods Memo has been arguing for many months that upscale food and grocery retailers -- including supermarkets, specialty retailers and premium-oriented natural foods reatilers like Whole Foods Market and others -- must focus on creating, implementing and aggressively communicating value-based retailing propositions during the current, severe economic recession, which we believe will last all of next year, and is going to get worse before it gets better between now and the end of 2009, if it ends then.
We've also offered this same analysis to premium specialty and natural/organic products brand suppliers and marketers in the natural-specialty foods space. Even if they sell specialty and organic brands geared to higher income consumers, value is King in these times, we've argued -- and still do.
By value we certainly mean price -- as low as is possible. But we mean more than that. By a "value proposition" we mean the creation of a marketing strategy (a set of things) that offers consumers a reason to purchase higher priced specialty and organic food and grocery items because doing so, at a decent price, offers value in the ways of good quality (such as nutrition, safety, ect.) combined with an afforable price, along with providing other "value" benefits.
For retailers in the segment it means cutting margins a bit to create a better everyday price profile in their stores. It also means buying smarter; including negotiating more and deeper deals and reflecting that savings at retail to consumers. It also means more solution selling, along with a focus more on specialty-oriented and organic product basics (oils, grains and condiments rather than packaged organic ready-meals, for example) rather than fancy niche items. It even matters how the stores are designed -- too fancy is a turn off; minimal could be in.
Most recently we've been arguing that if the current recession lasts as long and becomes as deep as we think it will, it's likley we could see some long-term changes in consumer behavior in the food and grocery product categories in the natural/organic and specialty segments. These changes could take the form of simplification -- consumers buying considerably fewer higher margin, value-added processed and prepared foods items for example in favor of more ingredient-oriented ones. Back to basics.
We are already seeing this as consumers cook more at home and not only buy more basic items, seeking the best available prices on them, but also are buying less in terms of total weekly grocery purchases. Less is more -- out of economic neccessity. They also are using coupons in record numbers, cheery-picking store weekly ads for bargains and buying items much more often in bulk form.
Harvard Business School marketing professor John Quench argues we're already seeing long- term changes in consumers, particularly in a consumer segment he calls the "middle-aged simplifiers." (His focus is in the United States.) These "new consumers" are the ones who most frequently shop at Whole Foods Market and other upscale chains. They are folks with plenty of money and plenty of education -- the folks who've been driving the U.S. consumer economy for many years.
Professor Quench argues that's over. He says the new, "middle-aged simplifier" "finds herself surrounded by too much stuff acquired. She is increasingly skeptical in the face of a financial meltdown that it was all worth the effort. Out will go luxury purchases, conspicuous consumption, and a trophy culture. Tomorrow's consumer will buy more ephemeral, less cluttering stuff: fleeting, but expensive, experiences, not heavy goods for the home," he says.
While these new consumers still have to eat -- and shop for and buy food and groceries (although it can be done online as well as in person, and that might become a "simple solution") -- its likely, if the professor is correct, they will adapt their new, simplified consumer lifestyle to food and grocery shopping as well as all else.
Lavish food emporiums like Whole Foods' mega-premium organic markets and H-E-B's uber-gourmet Central Market (and those of many other retailers) stores could be out, in favor of no frills, small-format minimalist markets like Sav-A-Lot or Aldi perhaps, as well as the more minimalist natural foods stores like those operated by fast-growing Sunflower Farmers Market and Sprouts Farmers Market, for example. Or, perhaps, the Whole Foods' of the U.S. will adapt and create that value proposition, if the professor is right about the extent of this new, "middle-age simplifier" consumer cohort.
Professor Quench argues his point in a recent essay, "How Recession Will Accelerate Consumer Downsizing," first published in his "Marketing KnowHow" Blog. The thrust of his focus and examples are mostly on premium and luxury consumer durable goods. However, make no mistake about it, if his prognostications are correct, this new, emerging consumer segment could have a profound change on the food and grocery segments in the areas of marketing and retailing.
And like all new consumer trends, this one too offers opportunity to the natural and specialty foods industry.
For example, quality-oriented natural and specialty food and grocery products with minimalistic features could be big with such consumers under the professor's scenario.
In addition, minimal yet attractive specialty supermarkets and natural foods stores that emphasis quality but not conspicuous consumption could be the ticket? (Time to read Thorstein Veblen if you haven't before or re-read him if it's been a while)
The key as always is to capitalize on a new consumer segment and trend in an honest and real way by offering true value and something consumers want to buy and consume regularly -- and in the case of food stores, shop in regularly. Adapt to thrive is always a good mantra. Natural~Specialty Foods Memo believes a new era of consumer minimalism is being ushered in by the current recession.
Below is professor Quench's essay:
How Recession Will Accelerate Consumer Downsizing
By John Quench
Professor of Marketing, Harvard Business School
Watch out for a new brand of consumer in 2008: the middle-aged Simplifier. She finds herself surrounded by too much stuff acquired. She is increasingly skeptical in the face of a financial meltdown that it was all worth the effort. Out will go luxury purchases, conspicuous consumption, and a trophy culture. Tomorrow's consumer will buy more ephemeral, less cluttering stuff: fleeting, but expensive, experiences, not heavy goods for the home.
The economic boom of the 1990s fuelled consumption and democratized access to a wider than ever spectrum of goods transforming former luxuries into "must-have" necessities. Millions played the lotteries or aspired to what they viewed on "Lifestyles of the Rich and Famous". As they grew richer, pressure increased on those below to trade up. And, as they traded up, pressure increased in turn on the well-off to buy even more--the second home, the big screen TV and the latest sport-utility vehicle. Enter the big houses that measured success in thousands of square feet of floor space, topped by the 40,000 square feet, $50m palace that Bill Gates has built outside Seattle. In 2006, 35% of new homes exceeded 2,400 square feet in floor space compared with 18% in 1986. Ironically, these mansions, many owned by business people on the road half the time, grew in number as the size of the average American household declined.
These huge houses had to be filled with more stuff, good news for the home-appliance and home-furnishing industries. Even grocery manufacturers benefited. Larger homes with bigger refrigerators can absorb more inventory. Flat birth rates in developed economies have put pressure on durable consumer-goods companies desperate for top-line growth. Product quality improvements mean these goods break down less often. So durable-goods sales depend on two things: the launch of new, higher-priced, higher-featured, often customized products that persuade consumers to trade in their existing appliances before they break down (think cell phones), as well as household penetration of products such as fax machines and printers previously used only by businesses.
As the world economy slumps, one consumer segment will grow faster than ever. The Simplifiers have four characteristics.
First, they perceive that they have more stuff than they need. Sure, they may collect something specific like porcelain figurines as a hobby, but they are the opposite of the pack rats who fill their attics and basements with "you-never-know-when-you-might-need-it" stuff.
Second, they want to collect experiences, not possessions. And they give experiences rather than goods as gifts to friends and relatives. Experiences may seem ephemeral. They cannot be inventoried except in the form of "Kodak" moments; but they do not tie you down, require no maintenance, and permit variety-seeking instincts to be quickly satisfied. Dining out, foreign travel, learning a new sport will prove more resilient than expected in the face of recession.
Third, their stuff embarrasses them. Their Range Rovers no longer tell the world that they are sophisticated town and country socialites. There are simply too many of them on the road to offer much social status. Worse, they now signal the irresponsible selection of a gas-guzzler.
Fourth, they have wealth that is so assured that it no longer requires conspicuous display. They lease their cars, rent other people's holiday homes, and would happily outsource other aspects of their lifestyles. They reject the marketer's continual pressure to spend more money on possessions rather than on education, health care, and other social goods.
These are the consumers who are now trading in their sport-utility vehicles. They include the empty-nester baby-boomers, less confident than before, who are tired of heating unused spaces in cavernous mansions, now preferring smaller houses with architectural character and intimate spaces, more charm and less maintenance. Their families are scattered, unable to share conveniently the family holiday home and often unwilling to inherit the burden of something they will never use. The new economy has made it even easier for consumers to get rid of their stuff. The high-tech equivalents of the yard sale, electronic auction sites, bring Simplifiers together with those who are yet to catch the habit.
This growing segment of Simplifiers presents a challenge to marketers. These are well-off people who value quality over quantity and do not buy proportionately more goods as their net worth increases. Their increasing reluctance to consume will dampen expected demand growth in developed economies further and therefore slow economic recovery, requiring consumer-goods multinationals to further focus their efforts on emerging markets where stuff will still be king.