Pay Cycles: When Month Outlasts Money

I WAS STRUCK to read comments a couple of months ago by Walmart CEO Mike Duke who stated that the chain’s shoppers seemed lately to be running out of money in the waning days of the month. He cited the shrinking size of market baskets as evidence. Tough times leading to tough choices.

Separate recent reports about the worrisome state of our consumer economy observe that budget-conscious shoppers tend lately to purchase smaller package sizes near the end of their pay. This, of course, is a key contributing factor to smaller baskets. William Simon, Walmart U.S. stores chief, made reference to this “paycheck cycle” at a recent analyst meeting.

This morning a report in Bloomberg News described shoppers upping their use of credit cards for purchase of household necessities and gasoline. This is a confounding signal that looks on the surface like a rebound in consumer confidence. In fact, it seems to be concentrated at the end of the calendar month. This may be a sobering sign that many households’ flat and declining paychecks can’t keep pace with price increases.

I’ll leave the economic and social import of this behavioral trend to the true experts. But I would like to offer a few thoughts about the time-based shopper insights that allow analysts to detect and measure the trend. Looking at detailed market basket trends day by day, it seems, can reveal a great deal about short-term household economics.

Not Card-Sharp? Then Be a Basket Case
This is interesting because we hear a different tune about insights from the many advocates of frequent shopper programs, a.k.a., loyalty cards. The detailed segmentation data these programs can deliver offer a wealth of target marketing opportunities for retailers and their suppliers, along with behavioral insights so detailed and profound that we don’t always know how to apply them in practice.

This is very cool stuff and it is credited with upping sales and profits at some pretty sharp retailers, like Kroger. Card-linked data allows marketers to put together a picture of a whole customer relationship over time, evaluate it, and group customers into target-able groups. Walmart and the so-called “dollar” stores, however, do not go in for those card marketing schemes. They stick deliberately to their EDLP guns instead, and resign themselves to data-poverty.

Or so it may seem. Actually, there is a great deal that may be learned just by looking at basket trends, especially at those retailers who enjoy very large footprints and shopper penetration. Card-free chains like Walmart, Publix and Dollar General can track the transaction logs by day and by local geography to extract very meaningful insights. Even if the shoppers are not individually identified, their collective behavior reveals much about pay cycle trends on a store-by-store basis.

Here is where even “data impoverished” retailers can find basis for some global and targeted merchandising tactics. Carrying sufficient smaller pack sizes in key categories every day is one obvious response Walmart says it has pursued. Sales and events may be scheduled to coincide with payday for local large employers. Managers’ specials may be timed to hit key mid-month and end-of-month dates.

Well there you have it. It’s still a share-of-wallet game, even when wallets are growing slimmer. Walmart knows, there’s much of tactical value embedded within store transaction-logs, even where there’s no loyalty data in sight. It’s not just dollar size of baskets that may influence action, it’s also item counts, categories included/avoided, package sizes and purchase influences from outside factors.

When the month runs long, wise retailers jump on their cycles.

© Copyright 2011 James Tenser

Social Media? – Nah, It’s Personal

New way to a shopper’s heart?

ALL THE RECENT chatter about “social media for business” is driving me around the bend.

For some time now, I’ve been searching for a terminology that would rescue us from imprecision and allow a meaningful business conversation to take place around the impact of smart phones within the retail environment.

At the National Retail Federation Conference and Expo two weeks ago in New York, the presentations and pitches frequently turned to the impact of social and mobile media, and I kept cringing every time I heard it. Here’s why it bugs me so much:

When new business phenomena have arisen in retail marketing, sloppy terminology frequently led to poor initial understanding of the business opportunity. Often it is due to a choice of words laden with confusing prior connotationor the absence of a suitable term.

We sometimes used “consumer” and “shopper” interchangeably; now we distinguish between those two customer roles. We spoke of “manufacturers” or “vendors” before the term “brand marketer” was introduced in the mid-90s. A deficient thought vocabulary renders some concepts virtually unthinkable.

In Your Facebook
Today, most of the marketers and solution vendors obsessed with “social media” are in fact formulating new ways of delivering one-on-one messages to targeted shoppers and attempting to influence what they do and say on social networking sites. It’s undeniable that one particular application Facebook happens to be used heavily for social play and sharing of consumer lore. Marketers are dazzled by the massive “audience” it has accumulated and are salivating to exploit the opportunity. How fortunate for Facebook investors.

But setting up corporate pages on Facebook or Twitter does not a strategy make. Indeed the existence of these pages implies a broadcast mentality from us to them. Despite the open visibility of customer comments on the wall, there seems to be relatively little interaction between consumers on these pages. Old comments get quickly buried behind newer ones, and only our social media hired guns bother to track and analyze them – in reports calculated to justify their existence.

Regardless of the channel, shopping is primarily about each individual’s personal success get the best deals; satisfy my needs most efficiently; manage my budget; impress my friends; etc. When a shopper turns to his or her personal mobile device to access tools to enhance in-store success, it’s a very personal action motivated by very understandable self-interest.

Getting Personal
I submit that when it comes to tapping shoppers via those pocket two-way radiowave computers we call smartphones, there’s very little “social” about it. It’s not social – it’s personal.

If we conceive of the mobile device as a personalized channel for interaction between retailers or brands with individual shoppers or consumers, then we would do well to set aside the imprecise term “social media” and start talking shop. These new media are personal media. Much of what happens on them may be social in nature, but everything that happens on them is personal.

The personal mobile device is taking shape as a personal nexus, where online, in-store, social, and commercial communications converge in unique combinations tailored by and for each individual. Each of us shifts roles at will, according to our objectives of the moment – searcher, receiver, reporter, sender, aggregator, re-transmitter, gatekeeper, purchaser, advisor.

Businesses that hope to play effectively in this incredibly fluid and fast-changing media environment had best get their minds around the personal nature of the shopper experience using mobile devices. When we discuss our strategy for personal media, the marketing mindset shifts in what I think is a constructive direction. Better decisions and practices must surely follow.

As for me, I have nothing against online friendships; but when it comes to business you may count me as anti-social. My reasons? Well, they’re personal.

© Copyright 2011 James Tenser

Bulletin from the Big Easy: Giant Killers

I returned Friday from the Northshore Business Conference, sponsored by the Southeastern Louisiana University Small Business Development Center, where I was privileged to be invited as the keynote speaker. (The event brochure may be downloaded here.)

The event took place Sept. 25 in Slidell, LA, a fast-growing town located north of Lake Pontchartrain, which makes it a bedroom community for both Baton Rouge and New Orleans. The area is enjoying a modest economic boost due in part to the displacement caused by hurricane Katrina a little more than three years ago.

Conference delegates represented regional retail, wholesale, service, finance and other trades. Especially considering the duress some of their businesses had just suffered due to the one-two punch delivered by hurricanes Gustav and Ike, I was grateful for their attendance.

My talk delivered a snapshot of current economic, retail, consumer trends; discussed where they are leading the industry; and proposed how independent retailers – “Giant Killers” – might position themselves for success within that competitive landscape.

Preparing for and attending this conference was a learning experience for me. In particular, I’d like to relate two brief anecdotes about the flexibility and resilience of businesses in Louisiana’s North Shore that are worth at least a second thought.

First is from an area fencing wholesaler who attended the conference and was evidently engaged and enthusiastic throughout. At the break he described how post-Katrina re-development had caused demand for fencing materials to boom. His business had grown considerably and he had expanded his facilities. Some retail competitors were not so lucky, however, so home and business owners were coming in to his warehouse searching for materials and parts which had become harder to find locally.

“We are being pushed into retailing,” he said, expressing some regret that his newly enlarged warehouse did not have a showroom area set aside for the walk-in business. The good news: some of the parts now in greater demand bring higher margins. The bad news: the new direct-to-customer business adds complexity, expands his assortment, and requires longer weekend operating hours. Talking to this energetic and positive business owner, I had little doubt that he would rise to the opportunity.

The second anecdote involves Folse Seafood, a retail and catering business operated by Jerry Folse and his son Jay out of Gonzales, LA. I was impressed by some press coverage I uncovered while researching my talk, and decided to give them a call. The answering machine indicated that the shop was temporarily closed following Gustav and Ike, but gave another number for Jerry, which I dialed.

To my surprise, Jerry answered his cell phone from the cab of an 18-wheeler. He and Jay were caravaning in two rigs toward one of the oil refineries in southwestern Louisiana, on a catering job. It seems the 2,000 workers laboring around the clock to bring the refinery back on line needed to be fed, and Folse Seafood had thousands of pounds of frozen shrimp and house specialty crawfish bisque that could keep the hungry workers nourished.

“Our power was out, and I knew the merchandise in our freezers would eventually go bad,” Jerry told me. “I sent ten emails to contacts I had at the oil refineries and other businesses along the Gulf Coast and six of them responded ‘yes we need you’.”

He booked a month’s worth of catering business at facilities in Louisiana and Texas, closed the retail location, loaded the trucks and hit the road. I asked Jerry if he was worried about the consequences of closing his doors for so long and the certainty of his answer impressed me deeply: “Our customers will come back to us in late October when the new crawfish season begins.”

Both these stories tell us something about the resilience and ingenuity of independent business owners in the face of extraordinary circumstances. I can hardly imagine a chain retailer responding to local challenges with these levels of commitment and creativity. Hats off to these “giant killers” and their peers across the Gulf Coast who are battling their way back to prosperity with grit, smarts and heart.

© Copyright 2008 James Tenser
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