March 2010
When Opportunity Knocks… By Stan Pohmer

Emerging from the recession are new, grounded consumers, and no industry is better positioned to resonate with their values than ours. Do you know how to get in step with them?

The classic definition of insanityis “doing the same things overand over again, and expecting different results.”

Trying to survive in the challenging times we’ll continue to face in 2010, using the same approaches we did before the recession hit us, is a form of insanity!

Though the noise about the economy may sound a little muffled with a just-reported 5.7 percent increase in GDP for the fourth quarter of 2009, a slowing of unemployment claims, and some positive reports from the housing industry in some markets, the reality is that a significant number of these positive movements were the result of government stimulus — which is not sustainable over the long term. Until consumers start spending with gusto, based on their improved financial condition and confidence in their financial futures, real economic recovery can’t take place. And the fact remains that people are still losing their jobs, albeit at a slower rate than in 2009, and the unemployment rate remains at10 percent. The “real” unemployment rate, which takes into account those who have left the job market or stopped looking for employment, is at 18.3 percent. The only sector showing job growth is “temporary” positions, which now accounts for 26 percent of the workforce. This is an important consideration because these positions are generally lower on the wage scale, don’t providebenefits, and can be scaled up or down asbusiness dictates.

So let’s just say that things are starting to stabilize and are a tad “less bad” than they were this time last year. We’re still a long way from recovery and positive job creation that will put the unemployed back into the workforce, and we can start seeing their spending again. We can still expect spending challenges from our consumers in 2010.

In a recent consumer survey, 79 percent of consumers said that they had been directly affected by the recession and had changed their spending behaviors as a result. In most cases, this change was reflected in an increased focus on value, trading down in quality and venue, challenging the need for buying things and purchasing only items they deemed necessary. And, as I’ve discussed in previous columns, this behavior will be with us for a long time, long after the economy recovers. These are deep-rooted, cultural changes.

To get through 2009, locally owned garden centers have done yeomen’s work to control operating costs and take as much cost out of the process of doing business, both to maintain some semblance of profitability and offer as much price value as possible to customers. You’ll have to continue these efforts in 2010. But the reality is that it is more difficult for locally owned garden centers to compete solely on price as their compelling value proposition than it is for the big boxes, which have lower operating costs and can work on shorter margins.

A Psychological Shift

Though the media messages we hear about changed consumers are mostly about their focus on low prices, a lot of recent research clearly shows the fundamental psychological changes that our consumers are experiencing, changes that are re-establishing core values and perceptions.

Let’s face it: The challenges you’ve faced in 2009 — and will continue to face in 2010 — are a direct reflection of the challenges your consumer has experienced. It hasn’t been easy for them, and it hasn’t been easy for you. And unlike most of the past recessions, this one impacted 79 percent of all households, even the Boomers and higher-income families. Though it runs counter to what we hear about the economy’s negative financial impacts, recent studies show that 43 percent of consumers surveyed said that the recession has had a positive effect on their personal lives. Seventy-eight percent say that they are “happy” with how their lives are going.

How can we make sense of this contradiction? What does it mean? Consumer psychologists say that, deep down, most people didn’t like the pressures of living beyond their means, funding their lifestyles with credit card debt and home equity loans. They didn’t like the pressure to “keep up with the Joneses.” They didn’t like the entitlements they felt compelled to provide to their children. They didn’t like sacrificing or compromising their values for material things. And they didn’t like being part of the Me generation any longer. It took the great recession to force this change, but even though it was painful, many welcomed it. It provided the opportunity to make a somewhat radical shift.

The Grounded Consumer

There’s a term for these new consumers: the grounded consumers. With a new value system driving behavior and their spending mentalities, the grounded consumer is challenging what they buy, where they buy it and, more importantly, why they should buy it. They’re less into conspicuous consumption and more into buying things that satisfy the needs of their inner self. It’s a “What’s in it for me?” attitude; they want to purchase things that provide personal meaning and are more consequential.

They’re guided by a yearning for things that make their lives simpler and more basic. Don’t confuse this with “retro,” but the attitudes that are developing are more traditional, centered on family and friends. Grounded consumers want to become more rooted and closer to Mother Nature, with an interest in sustainability and eco-friendly products and producers. And they are becoming more spiritual, seeking the reasons for life and wantingto believe in something biggerthan themselves.

To some, this sounds like a lot of psychobabble, but I think that there’s more to this than we might give credit to. Though grounded consumers still dress the same, look the same and may not overtly know or express the fact that they’re changing, it’s highly likely that what’s driving their purchase decisions is changing. And unless we’re aware of this, we’ll never be able to meet their needs.

Where We Fit In

I can’t think of many other product categories that are as in sync with this new mind and values set than ours. This could be the next opportunity knocking on our door, if we choose to listen and accept the fact that there truly are new, grounded consumers out there, with needs that wecan address.

I’m not suggesting that we lose sight of the growing importance of low prices and price value that’s evolved in the past year or so. But I’m also a realist and recognize that if low price is your primary compelling value proposition, you’re in a place where it will be difficult to win and win profitably.

Communicating the connection you and your products have with grounded consumers’ way of thinking can be as simple as the words you use on your signs, in your ads, and in your e-newsletters and social media vehicles. It’s also in the way you and your team talk to your customers when they’re in your store. I believe these new consumers can eventually figure out the connection by themselves, but we need to help expedite the process.

Connecting with grounded consumers can become your new compelling value proposition, a proposition that has the power to transcend price value, if you can find a way to communicate it effectively.

So here’s my question to you: When opportunity knocks, how will you answer? …

Stan Pohmer

Stan Pohmer is president of Pohmer Consulting Group in Minnetonka, Minn. He can be reached at [email protected] or 612.605.8799.


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