TWO YEARS ago, the optical business seemed pretty rosy. Sales were high, people were buying premium products, unemployment figures were low, investment portfolios were flush, and most practices were having a very good year. Then the financial bubble burst and everything seemed to change for the worse overnight.
It was inevitable that the financial system broke down. Before the recession, consumers were spending more than 3% of what they earned. That’s a recipe for disaster over the long haul. Currently, consumers are saving over 4% of what they earn. While it’s not an all-time high savings rate, it’s a meaningful one. It also represents more than a 7% swing in the way consumers now manage their money.
If you’re waiting for the recession to be over and for consumers to return to the buying habits they had two years ago, you’re likely going to be disappointed. The reason is simple—the spending frenzy of the last decade was an aberration. Consumer spending had gotten so far out of whack that it couldn’t be sustained. Don’t think of the recession as a temporary lull in spending; think of it as a consumer buying correction and you’ll have a better understanding of its implication on retail. Here’s why.
With unemployment at about 10%, those who are saving over 4% of their earnings, employed people experiencing pay reductions or furloughs, and the majority of Americans losing 40% or more of their investment savings, there’s just less money to be spent. Even more troubling is once the recession does turnaround, people are not going to return to their pre-recession buying habits.
To say this another way, buying has now returned to a more reasonable and sustainable level and will likely stay this way for some time. If you’ve made adjustments to your business to help you through these challenging times, you may be employing those strategies longer than imagined. If you haven’t made adjustments, it’s probably time to consider doing so. Few practices will be immune to the new consumerism that has arisen. Those that make the adjustments needed stand a better chance than those who don’t. As the recession eases, buying will increase, but it’s highly unlikely it will return quickly to the stratospheric levels we saw just a few short years ago.
Interestingly enough, the qualities that have been the hallmarks of good practices for decades are the keys to weathering the new consumerism—offering quality products at a price that’s a good value while delivering superior customer service. These are the things the new consumer is looking for. Providing them to the highest degree is a winning formula in this time of new consumerism.
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