Something's Got To Give

Big gulp of reality
Uncertainty about the economy and a lack of confidence about the short-term future is compelling consumers to make changes to their behavior. Whether or not the pull-back in consumer spending is bad for the economy remains a point of contention.

Some argue that as Americans embrace a new thriftiness, make smarter buying decisions and put more money into savings, the pendulum will slowly swing away from massive debt and toward an improved standard of living. Others contend that the only way to jump-start a flagging economy is to pump more dollars into it; they claim that increased savings and decreased spending can only exacerbate economic woes.

If the new administration’s stimulus plan includes a tax reduction, as promised, consumers may be more willing to spend. But unless there are big improvements in the labor market to accompany a stimulus plan, recession may linger for the better part of 2009.

Truth be told, no one really knows exactly how consumers will react until they do. The challenge for retailers continues to be finding ways to ignite interest in something new that sparks a purchase. Numerous restaurants and day spas tried a new approach during the past holiday season by offering a premium gift card to those who purchased a gift card at full value. It was a way to spark future traffic and lift sales, especially since people usually enjoy restaurants and spas in the company of friends.

Starbucks recently debuted a new line of teas and is marketing them as the perfect afternoon respite. Sure, some consumers have chosen to forgo their daily cup of gourmet coffee, but continuing to innovate via the introduction of new hot drinks and breakfast offerings suggests that Starbucks executives have an agenda of progress and innovation that hasn’t stalled despite the economy. They know their customer and they’re working to remain relevant, now and in the future.