A new age of heightening frugality is being heralded in numerous circles. This is certainly something we’ve been discussing around here for a couple of months. It is worth revisiting what this might mean for the strategies of firms.
Firstly, it is worth noting that simply chasing frugal shoppers is not a strategy in and of itself. There needs to more to it.
It would seem that the catch-all phrase frugal for a raft of different consumer behaviours, including:
– reductions in overall spending
– re-prioritisation of preferences
– pursuit of overtly cheaper products
– re-conceptualisation of some items as indulgences (and thus avoided by some and cherished by others)
As such, firms need to tread a very careful path. They must consider the extent to which their consumers have altered in terms of willingness to pay. They may need to adapt to having fewer customers and/or lower margins (as prices adjust downwards), new competitors (as perceptions and price points shift) and more successful substitutes.
Of course, not all consumers will act in the same way, so firms must navigate some confusing messages from the market. Sticking to one’s guns rather than sending a completely new message might work, as long as this behaviour is simply transitory. As noted earlier, certain firms are better positioned to make hay while the sun shines (or doesn’t) if their offerings are undoubtedly more miserly.
While it is an extremely difficult time for start-ups seeking financing, it is still potentially a very fruitful time for those who can come to market with ideas that appeal to this new and potentially pervasive mindset.
In a gratuitously nepotistic plug (the business is run by my cousin), perhaps a service like Rentoid, which connects renters of items, is well-suited to these times. So too might anything else that caters to shifting behaviours (e.g. price-comparison services, home-catering).