Retailing: The Contrarian Strategy

Will this recession represent the cusp that will create paradigm-shift in consumer behavior?

NO! In fact, quite the opposite. It creates major opportunities. A large window of opportunity exists.

So long as unemployment remains moderate, and overall household incomes fall slowly, consumers' behavior will also change in line with overall discretionary income. Of course, elasticity curves will change shape, and there will be difficulties in ascertaining the shapes. Some products will move from inelastic to elastic demand. There will be fewer units pre transaction. Dollar values per transaction will decrease. Product choices will change. This will continue over at least two more years.

But fundamental consumer behavior will remain the same. Customers will still demand value, albeit at the lowest price-point possible. On major retailer estimates that half of their customers are either brand-aspirational, or affluent but price-sensitive. These consumers will still expect service as part of the value equation. What should not happen is, as quoted from the Globe and Mail "you still don't want to go into a Wal-Mart, not find any help, not find the goods you want, and wait 20 minutes at the cash."
 

 All strategies have inherent risks

All strategies have inherent risks. A do-nothing strategy has perhaps the greatest degree of risk – the competition will move forward. A me-too strategy guarantees parity with the competition at best - but not if they execute better. And strategies, by their very nature, do not admit of experimentation and validation before-the-fact. They contain assessments, judgements, and decisions based on probabilities, not certainty. So, yes, they are guesswork.

In "The Halo Effect" Phil Rosenzweig identifies four areas of risk.
First – the Customers. Will they behave as anticipated?
Second – Business Competitors. What strategies are they about to pursue?

Third – the Company itself. How will the company respond internally to the strategy? Can it be executed profitably?
Fourth – Technological change. Never assume that the environment will not change. (Rosenzweig, 2009)
The first three above constitute the traditional C3 model of Company, Customer, Competition. Of these, only the first is moderately controllable; the others can only be guessed at probabilistically.