The U.S. Department of Labor last week released another raft of grim news, indicating that the recession is deepening and layoffs are spreading. New claims for unemployment benefits for the week ending Dec. 6 rose by 573,000, reaching their highest level since December 1982. Continuing claims increased by 338,000 to 4.4 million — the largest increase in continuing claims since November 1974.
It has been a brutal year for many Americans. Home values have plummeted, years of retirement savings have vanished, and now millions of people are facing the prospect of long-term unemployment as the job market dries up.
For retailers of all stripes, these conditions are alarming. And if it looks like times are tough now, wait until after Christmas. Shoppers are far from splurging this holiday season, but it seems likely that tightening the purse strings and sticking to a budget will be popular New Year's resolutions for many, many U.S. consumers.
Supermarkets, of course, are in a much better position to survive prolonged recessions than many other retail businesses. But the business of selling food has changed significantly since the deep recessions in the 1970s and early 1980s. Competitors such as dollar stores, supercenters and warehouse clubs have entered the grocery business and become widespread. Shoppers have a lot more options, and their definition of value has become more complex.
For supermarkets, the key for survival in this environment will be to develop an intimate understanding of how their shoppers view them compared with their competitors, because when shoppers start to really pinch pennies and plan ahead, they literally begin asking themselves why they shop at certain places. Is it proximity? Convenience? Friendly, helpful staff? Are these qualities worth sacrificing for a better deal elsewhere?
Fortunately, the supermarket industry has been redefining itself in these terms for years. Unlike supercenters, dollar stores and warehouse clubs, where the focus is almost entirely on low prices, supermarkets offer solutions. If you're not confident in the kitchen, there are people to offer advice. If you've forgotten how to put a meal for four together cheaply, here are some new ideas. If it's been a busy day and dinnertime is fast approaching, here's a spread of restaurant-quality takeout for less money.
Unemployment figures are likely to get worse — perhaps much worse — before they get better. For supermarkets, one major implication of this trend is that they won't be catering to as many two-income households desperate for convenience. Now, many households will have at least one adult at home planning dinner, clipping coupons and thinking ahead by making lists again.
In the coming year, fresh foods departments should anticipate the needs of that shopper. He or she will be getting reacquainted with cooking, and looking not only for ways to save, but also for ways to keep dinner exciting.