An article in the NY Times this weekend asks the question, “Can American drivers live without that new-car smell?” The answer seems to be “yes they can” as new car sales have plummeted to below 10 million, a 46% drop from their peak a few years ago. Most industry observers are forecasting continued lower sales through 2010 and maybe even longer. The question being asked is, “What’s the new normal?” Are we going to be content owning fewer cars and driving our cars longer? Considering how many new car sales were financed by home equity loans … buy a new car now and get a tax deduction…or cheap short term leases, it’s easy to understand why consumers are learning to love their old cars more. The easy money days are gone.
In my last post I talked about the need for reinvention. I’m think it is unlikely that consumer spending will rebound to prior levels. This recession has frightened many people to their core. The long held belief that things will always get better, I’ll get that guaranteed raise or a big bonus, has been shattered. With nearly 6 million Americans out of work, many people are downsizing, doing without, focusing on value, and actually trying to save money. From a marketer’s perspective, it looks to be a permanent change in consumer behavior.
With change, comes opportunity. Recent spots by Auto Zone target the “do it yourselfer” with the message that Auto Zone provides the quality parts and expert advice to help you get it right the first time. And , not unexpectedly, Auto Zone recently reported better than forecasted quarterly results with sales up 9.3% and net income up 9.5%. In an article in Ad Age, ” Marketers Fear Frugality May Just Be Here to Stay”, P&G Chairman A G Lefley, commenting on declining department store sales says, “”My belief is some of that (department store sales) is gone forever. And it’s gone forever because [the consumer] has changed her pattern of shopping. She’ll still go to get advice and counsel, maybe even see new products and new brands at department or specialty stores. But she’s replenishing online and she’s quite comfortable using our [less expensive] Olay lines. I mean, let’s face it, those Olay products test as well or better.” That’s a pretty glum outlook for premium brands sold through department stores but it also speaks to a big opportunity for value brands sold through lower cost online channels.
Maybe we should all stop looking back and instead focus on the many opportunities that come with change. It would certainly speed the recovery. Do you know what your customers need? Do you know what they want? Time for reinvention!
