The Disappearing Act

It’s a sure thing that belts are being tightened at all income levels. Consumer and business spending is being carefully calculated, pondered and restrained. Only the government seems to be on a spending spree.

Perhaps the product segment where this is the most significant is in upscale brands and luxury products. Until the recent plunge, average American households were acquiring luxury brands. In fact, the “average” American home was a haven of luxury compared to the average standard of living one generation ago.

No longer content with 2-car garages, our homes needed space for 3 or 4 cars. Newly built McMansions had entrance halls larger than the living rooms of a generation past. Each member of the family required his or her own personal bathroom. It was this feeling that we were all entitled to the luxury lifestyle that made the loss, or threat of loss, of luxury so much a part of today’s market decline.

When average Americans started living in relative luxury, the definition of luxury brands became blurred. We have re-defined luxury to such an extent that the truly elite luxury market has all but disappeared. And that makes it worrisome as to how quickly the marketplace will rebound as the economy turns around.

It has always been the luxury class that has led the way in pumping dollars back into the economy. With government programs set to “redistribute wealth”, and the drying up of credit to nouveau luxury buyers, a disappearing luxury class could leave too few consumers able to jump start the recovery.

In the business community, the disappearing luxury market is evident in the declining number of customers and the average value of the purchase. A current report from Moody’s Economy predicts that the second half of 2009 will be painful, and will be followed by a 2010 that at best will be uncomfortable.

As a business, you need to look at the areas where consumer spending is not disappearing. Brainstorm with your strategic team about whether you can fit into those markets. If yes, how do you go about re-positioning yourself? Take a look at these trends and strong markets as a starting point for your planning.

Self-Sufficiency. There is great potential for the “do it yourself” market. From home repairs and improvements to gardening, crafts, hobbies and food preservation, Americans are re-discovering the satisfaction and cost-savings of being self-sufficient.

There are many ways retail and service businesses can transform their business strategies to capitalize on this trend by changing the way they deal with consumers. Empty stores can be full again and quiet phones will start to ring.

Simplicity. Americans are learning to find pleasure in a simpler lifestyle. Expensive entertaining with friends has given way to casual picnics and informal get-togethers. Companies are following suit. Instead of lavish corporate entertaining, it is being done at a downscaled level. But, it is still being done.

Look for ways your products and services can connect with the comfort level of more simplified lifestyles. Change your positioning and marketing to capture this.

Quality vs. Quantity. American consumers are exchanging mass consumption for smart consumption. If you sell quality merchandise, now is the time to tell the quality story. Consumers need to know the purchase they are about to make will be a smart one; not one they will need to repeat in the near future nor one that will cause them problems.

The same is true in the B2B market. Quality in both goods and services is essential in a downsized business market. Fewer employees are working harder and need to rely on their outside vendors and suppliers. Lax quality control can drive your customers right through the door of your competitor.

Infrequent communication can also be a problem. As you tell your quality story, be sure to get it in front of customers frequently. In an economy where every week sees more businesses closing their doors, customers may not be sure you are still in business.

Leisure and Entertainment. Americans are not about to give up their love of leisure and need for entertainment. Despite working longer hours than residents in many other countries (especially in Europe), we like to reward ourselves.

The difference is that we’re staying close to home to do it. Luxury travel is shelved for less-expensive, shorter getaways to destinations within easy driving distance. Companies in these markets have excellent opportunities to increase sales.

Communities have exceptional opportunities to encourage people to discover their own backyards. Community events not only reinforce the value of the local market, they stimulate the local economy by getting residents and neighboring communities to patronize local businesses.

If entertainment isn’t your market you might consider how you could bring business your way by having an entertaining event.

Weddings. People don’t stop getting married because of the economy. Weddings produce product sales in a variety of markets – from flowers, to bridal wear, food, entertainment facilities, all those wedding gifts purchased and home products needed for the new couple to start life together.

Are there niches that you fit into for this lucrative market? A little innovative thinking could open a big new revenue stream for you.

Kids. We also don’t stop having kids because of the economy. In fact, the corollary could be just the opposite. And of course every child is also a grandchild. That makes a minimum of 6 adults who could be making purchases for every kid.

Kids have needs for all kinds of merchandise, activities, self-improvement programs and special interests. Take a look at what you do or sell and think about how you can tap into the kid market in a bigger, newer or better way.

As we continue to move farther away from past habits of mass consumption, companies, communities and organizations need to be positioned for the “new” consumer. The new trend is inconspicuous consumption. It’s at the heart of the disappearing act of lavishness and luxury. Fewer and better has replaced the flamboyance of bling as consumers and businesses both see the value in downplaying success at a time when the “haves” need to keep a low profile.

As you set your strategies for the final quarter of 2009 and 2010 you need to move out of survival mode and into innovation. As you do this, keep in mind what the writer and creativity guru, Roger von Oech, said, “It’s easy to come up with new ideas; the hard part is letting go of what worked for you the past two years, but is now out of date.”

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