Will the consumer psyche ever fully recover from the recession, even after the economy does?
Michael Vitelli, Best Buy:
I’m not an economist or a psychologist, but I think the answer to that is no. This has had a profound impact on a lot of people. My grandparents were from the Great Depression and that’s all you heard about for many, many years.
When I look at my generation, whatever that is, we grew up in a period of tremendous prosperity. Then all of a sudden, as we’re all starting to think about retiring, that has all changed materially. It’s not a trivial change in people’s lives, and I think it will have a lasting psychological impact.
David, your business caters to a celebrity clientele. Has the recession changed their buying habits as well?
David Pidgeon, Starpower:
Oh sure, and I’ll give you an example without using a name. We have a relationship with the Dallas Mavericks and work with all of the players. One of the new Mavericks, a great guy, was giving us an order, but he said somebody else gave him a bid that was $20,000 less. Usually pro basketball players don’t really care what they spend, but he said there had to be a negotiation. In the past that never would have been.
I recently had a guy in, a friend, wanting an extra $500 off. I was like, “The $3,000 suit and the brand-new 600 Mercedes is telling me you don’t really need the extra discount.” He said he knew he shouldn’t have driven here with the new car.
That’s what we live in right now, and it doesn’t matter who the client is. The bigger the client, the more they expect at this point.
People are doing stupid things for no reason, that’s what’s causing it, and it’s creating a lot of confusion over price. We sit around the table looking at TV prices that we haven’t seen in our whole lifetime, and then you have a customer come in when something’s marked at cost because you’re trying to match a price leader, and they ask for $100 off that. You look at them like “Are you crazy?” People don’t understand, and it’s our fault. We have shoved all of these low prices at them, and their thought process is, “Hey, I’ll just keep going lower because whatever it is, I can get it for less.”
A way to get away from that is the use of “free,” or the bundle, because in tough times people want a reason to buy and they want something for free. But I don’t think our customers realize the value of a TV right now compared to other consumer products. Our industry ought to concentrate on showing the value we offer rather than focusing on price.
Fred Towns, New Age Electronics:
Part of that is also the Google search mentality. We all carry smartphones today, and shoppers are so well-equipped walking into a retailer that they can in one second pull up in their hand what a search engine says is the best price out there. You see it in the car business too. People come in now and know the Blue Book value and what the best prices are anywhere in the United States for a vehicle. They also know what to say and ask. They are armed differently to attack a retailer, and we forget about that. I saw a lot of people over the holidays looking at a TV in a store and then punching in the model number to see if that was really a great price or not.
Gilbert Fiorentino, Systemax:
That is one of the greatest challenges we face in the next couple of years. There is an Apple app called Red Laser where you can just scan a barcode. There’s one for the Blackberry called Edocrab, which is barcode spelled backward, and I even fi nd myself using it. I was in a bookstore with my daughter, who needed an otoscope for medical school. I scanned the barcode. It was $360 in the bookstore, and Amazon had it for $160.
It’s very hard to stand in a retail establishment and not order this right now on my Blackberry for $160 and have it in two days. But what happens when that bookstore can’t afford to carry that otoscope anymore because everybody is doing the same thing, and they can’t make the margin that’s required to carry that? They’re not going to bundle it with a scalpel.
What’s going to happen at that point is we will see more deterioration in our space. That is one of the greatest challenges we are going to see in the next fi ve years. How are we, as retailers, going to continue to generate margin when there are very, very low-cost suppliers who can provide things to customers in a few days with no shipping, and no sales tax for that matter. It’s very, very aggressive compared to a retail mode.
Dave Workman, PRO Group:
That was one of the unique aspects of the recession. Conspicuous consumption went out of vogue, and it was really hit from two sides: You had the baseline unemployment numbers and the upper end of the market, which was traditionally more recession proof. Everybody was to whatever degree trading down in their decision making, and the challenges were exacerbated by that dual affect. At the same time with all of the pricing pressures and everybody chasing that business, it’s no surprise that the results were what they were for the year.