August Newsletter : While You Were Sleeping
Earlier in the year one of my clients announced: “this year it’s going to be all about tactics and survival”. She foresaw businesses hunkering down, reducing inventory, and slashing budgets for advertising and mass communications in favour of below the line or even no promotional activity whatsoever.
She was right. That’s what the bulk of New Zealand businesses have done this year.
But not all.
Energy Returns.
In Windshift’s 2009 Right for the Times research we’ve identified that the brands that haven't rested on their laurels and the owners and CEO’s who've kept on trying new things and offering more value seem to have been rewarded for their effort. Whether they were in the “right place at the right time” or not.
Further I’d argue that by their optimism and flexibility these people and their firms have actually given us the opportunity to shorten the recession.
They really didn’t stop this year. They played it a little smarter and paid a lot more attention to the effects of their expenditure. But they didn’t stop trying.
Now, free from the worst of the debilitating price rises of last year, a sizeable group of consumers are shopping again, for themselves, their families and their homes. Retail sales figures are up – mostly in the low to middle end of the market.
In our research, firms like The Warehouse, Briscoes and Farmers have risen sharply in our Right for the Times ratings, mirroring this increase in sales figures.
A New Value Equation
But the value equation is different now. People seek bargains. Or greater value for money. The battle for designer shoes is over. And #1 Shoe Warehouse is the winner.
Mass affluence is a faded dream.
So really, the current upheaval in the job market is all about reallocating people from jobs which won’t be supported by consumers or taxpayers any time soon into work that has the chance to deliver value for money to somebody who wants it.
If you’re in a job with a cost structure that’s supported by this lower level of consumer expenditure, you’re pretty safe. If not . . . hold on tight. If you’re out of a job, keep an eye out for jobs that seem sustainable in the new climate.
Try to aim for maximum value added - rather than minimum wage.
The Consumer Landscape
Even if the recovery takes firm hold next year, don’t get the idea we’re going straight back to the hellish debt-consumption spiral of 2002-5. This is a different consumer landscape. People like to shop for bargains. And probably will do so for some time.
The top guns of our 2009 Right for the Times survey remain the same as last year – Pak n Save, TradeMe and Google lead the way. The Warehouse, Bunnings Mitre 10 Mega and Kiwibank follow.
Broadband is the only absolute must have in 2009. No one’s giving up their broadband if they can help it. Premium brands are really not on the radar.
Welcome to Discount New Zealand Inc
It’s still the Time of the Hunter. But hunting is easier now. Consumers expect discounts. In fact we count on them.
Something’s gotta give and in the supermarket world it’s product brands. The Right for the Times ratings of supermarket private label brands have continued to grow. Only the strongest survive in the consumer mind and even then they’re beaten in the ratings by Pams, Signature Range and their mates.
I didn’t realise how embedded these sentiments had become here until I had a conversation with an Australian researcher a few weeks ago. Comparing notes we found that New Zealand is far more oriented to discounting than Australia.
Products taken for granted here as good quality alternatives are often seen as cheap rubbish over there. Trade Me has a place in the New Zealand landscape that eBay just doesn’t have in Australia. Here we get kudos from friends and acquaintances for buying cheap. There, they still cover it up.
I guess, since New Zealand is essentially trying to have the same standard of living as Australia does on significantly less income, it’s not surprising that we should have already found the short cuts.
With people very loathe to worsen their debt position and with few social barriers to bargain hunting in New Zealand, I think we can assume it will continue.
It’s Spring!
We estimate that about 15-20% of firms are exuding the blend of energy and opportunity-seeking that is helping to reinvigorate our markets.
You can actually feel it in the air. Visit their head offices as I do from time to time for some of them and you feel a strong sense of purpose and energy. It’s their time and they know it.
But a word to the others. While you were sleeping, hibernating, waiting for spring, they’ve been busy.
Hunkering down is now “wrong for the times”. You have to get smart and get out there - listening and talking to consumers. Because we've changed and so have our expectations.
There are game changers everywhere. Some of them will be competing with you.
Business inactivity is now a bad thing. Not only does it worsen the situation for individual firms, it holds back economic recovery and it lengthens the time we’ll take to adapt to the new circumstances.
Who’s in Control?
Does this mean consumers need to get moving too? Well this isn’t a bushian exhortation for consumers to get out there and madly spend. And certainly not to spend beyond our means.
Right now the quality of our spending is just as important as the quantity.
Spend your money in New Zealand and it benefits New Zealand in some way. Even if the profits go overseas. Spend it overseas and it really doesn't - unless it's an investment.
If you’re a frugal deliberate kind of person you can enjoy the beneficial effect of being selective about the places you spend your money – choosing the smarter ones, the NZ owned, the tried and true – whatever works for you.
Economists talk about a fragile recovery that may be hampered by moves in macro-indicators - such things as the exchange rate and interest rates.
People with a more psychological or anthropological point of view believe that's a fairly blunt instrument.
I think that, at ground level, personal confidence and seemingly irrational responses can carry huge weight. As consumers we produce around 50% of New Zealand's gross domestic product. As consumers we actually created the downturn when we responded to price stress and economic uncertainty with fear and frugality.
So can we now nurture this little upturn? Only if we get our ducks in a row.
Our natural proclivity is still to reduce debt, save and to spend on value for money options. Most of us prefer to focus on core essentials rather than silly luxuries. So that's where the money's going in the economy.
Let's hope that's where you are too. You and several million others of course.
Cheers
PS Presentations and reports on our 2009 Right for the Times Study are now available. Click the link for more information about content and cost.
Jill Caldwell is Director of Windshift Communications Ltd. Click Here to contact Jill directly This is a free monthly newsletter provided to direct subscribers and legitimate Windshift contacts only. No further use is made of subscriber information. [Copyright Windshift Communications Ltd 2006]
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"The battle for designer shoes is over. And #1 Shoe Warehouse is the winner."