• by Lisa Collings , February 26, 2009

Recession is a word that keeps us up at night. Add low consumer confidence, and the combination can be lethal for the retail industry.

In the current climate, questions abound, and there are no surefire answers when it comes to capturing market share in a shrinking economy. Business is down across all levels of retail, resulting in the need for retailers to reconsider consumer behavior and shopping patterns.

You can't market to a recession - you have to market to consumers and their response to it. Examining the effects of the recession on consumer behavior and spending will provide an insightful way to assess the heart of the retail sales crisis: consumers' reaction to the economy, not the economic crisis itself.

Consumption: It's a dirty little word

In its purest sense, the American Dream is filled with a life of attainable goals and the ability to surpass the prior generation. But as a society, the misinterpretation of this dream has gotten us into trouble. Achievement was defined by materialism. The reality of our behavior has hit us head on, and we're shifting from a spending culture to a saving culture. We are now more aware of the consequences of our spending and feel the need to radically cut consumption as part of our newfound saving mindset.

Consumers are buying LESS: How do you steal market share in the face of declining consumption?

Understanding your core consumer and potential new customers couldn't be more important. Focusing on loyalty and retention is paramount. Innovating in ways that add meaningful value will set the opportunistic retailer apart. As an industry, we have to begin to accept that discounting more deeply will not adequately address the anti-consumption movement.

Want vs. Need: The New Value Equation

Some would say that a double whipped latte to start the day is a necessity not a luxury. Others just can't watch the big game on anything smaller than 56-inch plasma. In a culture of consumption, the line between want and need is nonexistent. In a society of savers, however, the line becomes increasingly clear. Consumers have adopted a need-based purchase philosophy and are evaluating purchase decisions now more than ever. The threshold of need has come down.

Consumers are buying what they NEED: Do you know how your customer defines need?

Needs are not limited to tangible items. Needs are defined by what customers value and are dictated by lifestyle and consumer demographic. Does your demographic need to feel pampered? In this case, transforming yourself into a resource is invaluable. Relevant services like personal shoppers and free online returns have the ability to move a consumer's purchase from a want to a need. There is confidence gained by managing tradeoffs without feeling like you've sacrificed. If we see a surge in consumer confidence it will be one fueled by a new mindset, not the unbridled confidence to consume just because the economy has suddenly turned around.

A Shopping Strategy: Don't Leave Home Without It

There is link between being savvy about wants and needs and shopping more strategically. This self awareness is linked to the new belief that consumption and materialism are something to eliminate from current behavior. A positive spike in the economy won't likely spur the same old glutinous consumer spending. In fact, developing a shopping strategy stems directly from being self-aware and then putting that awareness to work.

As a society, consumers of all incomes and socio-economic levels are being encouraged to be smarter about saving, investing and purchasing habits. Who ever thought fashion magazines would be teaching us how to shop our closet and use lists in an effort to buy smarter for less?

A new philosophy is taking hold and it is one of resourcefulness and thoughtfulness. Some may say this will take all the fun out of shopping, but there is much to be said for the rush consumers can get from being smart and discerning.

Consumers are purchasing with FOCUS: is your product offering part of their strategy?

Consumers, especially women, will continue to aspire to what is new and fresh but they will be more selective and creative in how they buy across all categories. They will look for help from retailers in navigating this landscape - and they won't just buy what's new but what's right and relevant.

Relevance becomes extremely important as consumption shrinks and consumers become more reflective in all aspects of their lives, especially shopping.

Editor's note: If you'd like to contribute to this newsletter, contact Nina Lentini.