With all the dreary news about October showing the lowest retail shopping rates in 24years, I thought this might bring a smile. Unfortunately, the economy is unlikely to recover without a change in consumer confidence and consumer spending. Will deep discounts and low prices bring consumers back to airlines, stores and restaurants? What do you think?
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I do not believe that deep discounts and major price cuts will encourage consumers to take trips and eating-out at restaurants. A majority of consumers are watching their savings accounts and 401Ks decrease daily and many are uncertain about the future of the economy and thier jobs. As a result, these consumers will buy what they NEED and not what they WANT. Until the economy picks-up and becomes somewhat stable, consumers will be reluctant to make unnecessary purchases regardless of how great the deal may be.
I think a significant change in consumer confidence and consumer spending is going to take some time. With consumers watching the financial market fall out, the unemployment rate rising, and overall uncertainty in the economy recently, I don't see consumers jumping at the opportunity to spend their discretionary income (if they have any) just because some companies are offering discounts and lower prices. I think companies don't have much of a choice but to offer discounts and lower prices in hopes of reaching some consumers, but as a whole I think consumers will be watching their budgets much more closely than in recent years.
From a macro perspective, consumers will continue to delay spending until the economy shows signs of improvement. While consumer spending is down, consumers are still spending. To survive, it's important that firm's capture as much of consumer spending as possible. At a time when consumer's are more price sensitive than ever, firm's must offer values in the forms of discounts or value ads to stay competitive.
I believe that deep discounts and low prices will bring customers to the low cost leaders in the airline (Southwest), retail (Wal*Mart) and restaurant (McDonald's) business.
In other words I do not think discounts will bring business to all industries, or companies unless that is the business model of the company. While Wal*Mart reported higher than expected earnings, almost all other retailors are struggling. A poor econmy speaks to the strength of Wal*Mart, low prices.
For consumer confidence and consumer spending to increase Americans must have faith in the financial system. Personally I don't think discounts and low prices in retailing and other industries can assist in consumer confidence.
With the economy in shambles, increasing unemployment, and a continuing devaluation of the dollar, it's hard to say that low prices alone will be the cure-all. The fact is that people in the US overall have lived above their means, and the economy has been dangerously overheating for some time. From an economic perspective, it follows that people will have to live below their means until things stabilize. This unfortunately means lower profit levels for all businesses, including the low-cost providers.
I don't believe deep discounts alone is the answer to bring back consumer confidence. Money is tight so every penny out of the pocket is deeply felt by consumers regardless of how much it is. I think the answer lies along on empathy. Retail stores should express that they really understand what consumer is going through and how they play a part in making every day decisions easier for consumers. At a time like this, retaining customer loyalty should be the most important goal. Once consumers switch to generic brands, they may never come back!
I believe that the discounted prices will definitely help consumers feel more confident about spending money during this economic downturn. The main concern of consumers is receiving their perceived value of any good or service. Since the value of a dollar is now perceived higher, their value of goods and services are also higher. To help adjust for this current perception, companies who decrease prices will see their profitability ultimately increase. This is especially true for luxury spending options like eating out and taking trips. Meals at restaurants are not only considered a small luxury, but sometimes a required part of life as many people need meeting locations or networking events. Trips may not see as much of an increase, but their number of buyers will definitely increase.
I think that deep discounts will encourage consumers to spend more. I don't think discounts alone will answer the countries economic problems, but I believe that it will be especially important during the holiday season when consumers are likely to spend significantly more than they do the rest of the year.
I think that concerns about the economy will continue to exist and consumers will be much more price conscious this year and regardless of discounts, consumers will be spending far less.
I think it will help to a certain degree, but not as much as the companies offering the discounts are hoping for. People are watching the news and getting scared about their financial futures and I do not believe their confidence can be bought with discounts, because those discounts show the retailers are in just as much panic about the economy as the consumers. That doesn't give consumers a lot of confidence.
In these times of economic distress people pay a lot more attention to how they spend their money. That being said, they will continue to buy the things they need or have to buy. For example, parents will buy Christmas gifts for their children this holiday season. They will spend less than last year and discounts and promotions will have an effect in their purchase decision.
Many people I talk to have the opinion that the economy as a whole is bad, but their financial position is overall okay. This leads me to believe that discounts and promotions may be effective this holiday season to some extent. The issue for companies is that the competition will be more intense than ever before so they will need to be aggressive with their pricing and promotions.
I believe that the economy will loosen up in the next couple of years and people will revert back to their old spending habits. In times of a tough economy people cut back but its mostly human nature to go right back to our old ways.
I think that times are so uncertain right now that even big discounts will not lure customers into the stores. It is going to take some time for consumers to rebuild their confidence in the market. I think things will continue to get worse over the next few months.
I think that sharp discounts will entice some shoppers to spend more, but this alone will not solve the retailers' problems. Unfortunately, many people have lost their job (some around the holidays). These people have many other pressing things to worry about and cannot be enticed to spend more.
The majority of people are probably cutting back due to a depreciating portfolio or house. These shoppers may use the discounts as a buying opportunity to grab things that were previously too expensive. I feel that at the margin, however, the unemployed and the fear of being laid off will prevent any real recovery for retailers.
I don't think any type of discount or low price can bring consumers back to the level they were at before the economic downturn. Consumer confidence is extremely low and most people believe that we are not yet at the bottom of the economic recession. People will continue to save and curb spending regardless of discounts. However, they may help boost a short term revival.
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