Recession sparks new retail imperatives

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Recession sparks new retail imperatives

By David Orgel - 08/18/2020

What is the outlook for the economy at this point in the pandemic and recession? 

It doesn’t really matter if you’re a consumer trying to make ends meet right now, possibly without a job, in the face of reduced help from government benefits. 

It’s impossible to list all the eye-popping economic stats, from GDP contraction to personal consumption declines, that relay how much consumers are challenged, but here are just a few:

  • Food insecurity is on the rise, with almost 30 million U.S. households reporting in late July they lacked enough to eat;
  • Food prices have surged as consumer demand increased. The overall July rise in retail food prices of 4.6% year-over-year was the third-highest increase since 2012, according to a Seeking Alpha article; and
  • Unemployment remained a huge problem at a time of resurging COVID-19 cases.

Given all the consumer pain in the ongoing recession, a little bit of creative relief from food and drug retailers goes a long way. Those retailers that step up will not only improve their reputations, but also gain long-term loyalty. There are good examples of retailers acting to support customers, ranging from creative discounts to community good works programs. 

Given all the consumer pain in the ongoing recession, a little bit of creative relief from food and drug retailers goes a long way. Those retailers that step up will not only improve their reputations, but also gain long-term loyalty.

Here are a few strategies succeeding right now:

Affordability: Retailers whose brand propositions already center on affordability are ahead of the game. Ahold Delhaize USA recently said that Food Lion is now the company’s fastest-growing brand, with its emphasis on fresh and affordable and a high-density store network. Meanwhile, value-leader Aldi plans to open 70 new stores in the second half of this year. 

Store Brands: It’s hard to ignore all the momentum that private brands have received lately. Retailers are emphasizing these products, which are on target for the recession — and beyond — with a combination of value and quality. Moreover, store brands have received lots of new customer trial given all the pandemic-related out of stocks.

SNAP and E-Commerce: The government’s Supplemental Nutrition Assistance Program has entered the e-commerce age as an increasing number of states are participating in a pilot with the Department. This move has led many retailers to accept SNAP payments for online orders. An example is Hy-Vee, which recently made this available to customers.

Food Drive Campaigns: Retailers are accelerating efforts to combat hunger through community good works efforts. One of the latest examples is Grocery Outlet Bargain Market, which raised $4 million in food drive campaign funds across more than 350 stores.

Creative Discounts: At a time when fall school openings have sparked pandemic-related concerns, what could be a better move than offering temporary discounts to show support for communities and educators?  That was the thinking at retailers including Kroger and Meijer. Kroger offered 10% discounts on general merchandise to teachers, administrators and parents, while Meijer offered 15% discounts to teachers for classroom essentials.

Getting Personal: Retailers are leveraging their increased capabilities with data and personalization to offer targeted customer discounts. This strategy underscores that one size doesn’t necessarily fit all when it comes to offers.

Retailers don’t need to pursue all of the strategies, as the needs will depend on the nature of individual customer bases. But retailers would do well to embrace efforts that show they’re not tone deaf at this challenging time. Let the economists debate the future trajectory of this recession. For retailers, the imperative is to act now by showing empathy and understanding, a stance that will help cement long-term customer relationships. 

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