Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Sunday, February 1, 2009

Recession Proof, really?

In our first lecture the rebirth of convenience stores was identified a s a current trend in retail marketing, however conveniencestorenews.com warns that the recession will negatively effect gasoline, tobacco, candy and snack sales, all of which are convenience stores’ staples.[1] This got me thinking, do recession-proof retailers, or consumer goods actually exist, and if so what retail value propositions do these offer?

Gasoline and tobacco are considered inelastic goods, as demand is not sensitive to a change in price, however conveniencestorenews.com claims that there customers are selecting lower grades of gasoline, cheaper brands of tobacco and reducing the quantity purchased in a single transaction, in an attempt to spend less. It would be hard to argue that inelastic goods are not recession proof, however more specifically; it seems that the lower end brands of inelastic goods are the true recession proofs. The retail value proposition (RVP) they offer is the experience or use the consumer is seeking, along with price.

On the other hand, candy and snacks are usually impulse purchases and it seems feasible to assume that consumption of these goods will decrease in a recession as it is an easy, and obvious way for consumers to reduce their spending, for this reason I would argue they are not recession proof. However it could be argued that consumption of these products will increase during a recession as consumers substitute eating out or going out for a much cheaper night in with these goods, in this case the retail value proposition is price.

A retailer whom is thriving in the current economic climate is Amazon, who has just reported its most successful holiday season ever. The Chief Executive comments that this has been achieved because of Amazon’s relentless efforts to offer customers a great selection and low prices, including free shipping offers.[2] The products offered by Amazon are by no means inelastic, Amazon’s increased sales are a result of stealing market share from competitors, not because the category has experienced sales growth, therefore it is Amazon’s and not its goods’ RVP which is recession proof. Their offerings of price and selection and convenience are irresistible for consumers in the current climate.

It would hard to dispute that an RVP offering price in the current economic climate is attractive to consumers, the majority of which become more price sensitive during a recession, however in order for brands and retailers to recession proof their selves they must offer more than just low prices. Other elements of the RVP must also be on offer available to customers. Amazon have demonstrated that a retailer selling non-commodity and elastic goods can still thrive during a recession, they have done this by offering three elements of the RVP. It seems likely that convenience stores stocked with a wide selection of goods, including cheaper brands will do best as they can offer three elements of the RVP.

[1] Are C-Stores Recession Proof? http://www.csnews.com/csn/print/article_display.jsp?vnu_content_id=1003789103

[2] Profits Rise at Amazon as Shoppers Seek Deals. http://www.nytimes.com/2009/01/30/technology/companies/30amazon.html?scp=1&sq=recession%20proof%20retailing&st=Search

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