INSIGHT: What "Value" Means to Today’s Consumer
"Value" has been the retail code for low prices during the global recession, but the oft-repeated word is taking on a broader definition that includes quality and selection.
Shoppers are still responding to the low price message as unemployment remains high and the stock market gyrates.
But clever marketers, aware that consumers may be tiring of being constantly reminded of their tight budgets, are now tinkering with the value message to incorporate elements of workmanship, customization, convenience and service, executives told the Reuters Consumer and Retail Summit in New York and London.
"Regrettably, discounting price has got confused with value. Value is a combination of quality, and price, and environment and assortment and service," said Mark Price, the managing director of British grocer Waitrose JLP.UL.
That company is raising its marketing budget up to 50 percent this year to capitalize on stronger sales and new stores.
Matthew Shay, chief executive of National Retail Federation, the U.S. retail industry trade group, said that value "means more than just price."
Same-store sales among U.S. retailers -- a key gauge of retail strength -- have been lackluster this year in an uneven economic recovery. Meanwhile, Europe is now reeling from a growing debt crisis pressuring the euro and consumer demand.
But retail experts agree that consumers with jobs are spending again, albeit judiciously and sporadically.
"Today's consumer is very astute and thinks very carefully before they spend. What we have to do is recognize that and target our offer accordingly," said David Wild, chief executive of Halfords (HFD.L), the British retailer of car parts to bicycles.
But that may not mean repeating the same message about rock-bottom prices. Even Wal-Mart Stores Inc (WMT.N), the largest retailer in the world, tinkered with its message a year before the global recession, replacing its "Always Low Prices" campaign with the current "Save Money. Live Better."
As Ian Cheshire, the chief executive of Europe's No. 1 home improvement retailer Kingfisher (KGF.L), said: "There's a bit of recession burnout among customers."
Gilbert Harrison, chairman of investment bank Financo, agreed.
"They (consumers) want to feel better about themselves and they want to carry a fancier shopping bag," Harrison said. "It doesn't have to be a Neiman's or Saks shopping bag but it may be something better than a Wal-Mart or Target shopping bag."
Online fashion retailer Bluefly Inc (BFLY.O), for one, has changed its marketing message entirely from its early days, said Chief Executive Melissa Payner.
"We were very much about the discount, that was the biggest message," she said. "Today the message is about the trend and how you wear that trend and that's the biggest statement.
At U.S. furniture maker Ethan Allen (ETH.N), value means not trying to compete on price with mass market makers of furniture like IKEA IKEA.UL or Target (TGT.N), but rather focusing on quality.
The company's clientele is largely in their 30s and older, at an age where they want furniture to last. They define value as well-made products that also offer options such as customization, said Chief Executive Farooq Kathwari.
"People are today looking for better quality. People are becoming more of an owner rather than a user of products," eschewing "throw-away" consumerism where cheaply made and cheaply priced products are discarded within a few years, he said.
Kathwari said its American-made business model allows better versatility and choice for customers, as domestic manufacturing means shoppers can make last-minute custom changes to their furniture, but it cannot be solely relied upon as a marketing message.
"At the end of the day, people are going to buy a product that represents good value. They're not going to buy it if it's American made and it does not have good quality and value," he said.
Source: Reuters (Reporting by Alexandria Sage; Additional reporting by Mark Potter and James Davey; Editing by Michele Gershberg and Tim Dobbyn)
For more retail perspectives, please contact Thomas Walther.