We have all seen firsthand firsthand how economic downturns can impact retail. We must accept that Australians face a significant financial challenge in the immediate future, and retailers must adapt their product offerings to these times. 
 

Here are the RBA Australian Economic Forecast: Labor Market, Consumer Spending, and Inflation Trends (2024-2026)

As you can see, unemployment is expected to remain stable, and wage growth will be less than inflation, so household consumption will be below inflation. As such, the consumer and, as such, the retailer are looking at challenging times.

Understanding Consumer Behaviour in Tough Times

During economic uncertainty, consumers tighten their belts and try to cut money where they can, but they don't stop spending entirely. Instead, they prioritise:

• Essential items
• Products that offer value for money
• Small, affordable luxuries

Targeting your inventory with these priorities can help weather the storm as a retailer.

I have seen firsthand how retailers in one field, like newsagencies, have moved successfully into totally unrelated fields like liquor, groceries and clothing, so accept an idea that is out of the box.

Top Product Categories to Consider

1. Children's Essentials

Parents always prioritise their children's needs, which they rarely cut down. Consider stocking:

• Children's clothing (especially basics) - Clothing, in general, has proven to be an item that most retailers can get into. Kids need a constantly changing wardrobe.
• Particularly, look at baby products.
• Educational toys and books
• Children art supplies

My experience talking to retailers Is that children's clothing maintains steady sales even when adult fashion retailers struggle.

2. Affordable Luxuries

People still want to treat themselves, just on a smaller scale. Look into:

• Cosmetics and skincare - Women do not cut down much on cosmitics.
• Gourmet food items
• Small home decor pieces

Tip: Create attractive displays of these items near your checkout to encourage impulse buys.

3. Home Maintenance Products

As people spend more time at home, home improvement spending goes up:

• Tools 
• Paint and decorating materials
• Gardening essentials
• House cleaning supplies

4. Health and Wellness Items

Health becomes a top priority during uncertain times. Consider:

• Vitamins and supplements - I wonder why more retailers overlook these products.
• Fitness equipment and books.

5. Pet Supplies

Pet owners rarely skimp on their furry friends. Stock up on:

• Toys and treats - particularly dogs
• Pet care items and books.

Pricing and Promotion Strategies

To make these product categories work for your business:

1. Emphasise value: Highlight cost-per-use or long-term savings.
2. Bundle products: Create value packs that offer slight discounts. Bundles work well in difficult times.

Leveraging Technology

Your point-of-sale system can be a powerful tool in navigating these challenges. Use it to:

• Track inventory trends
• Identify your best-selling items
• Manage promotions effectively

Personal insight: Our POS software has helped retailers quickly identify their product mix that sells now based on real-time sales data, which is a crucial advantage in rapidly changing markets. This information is not theoretical but honest facts about what is happening in your business. It takes you one second to find out, see here.

The Bottom Line

Success in retail isn't about being the past, but about the future, the most adaptable to change always win.

Adjust your product mix to the current times, emphasise necessities and affordable treats. Really dig into the information from your POS system - it's full of useful information about what your customers buy from you.

These approaches have helped many retailers I've worked with stay strong during tough economic times. You can do it too.

A supplier to newsagencies approached us about a range of sustainable products they are releasing, eco-friendly greeting cards.. This brought up the Sustainability Dilemma: what "Customers Say vs. What They Buy." Do customers want these cards? 

This is a frequent problem in retail, where people express their wants but act differently. A famous example of this is studied extensively in marketing textbooks, in the 1950s when Ford introduced the Ford Edsel. This is widely regarded as one of the biggest marketing failures in history. One factor in this failure was Ford's decision to listen to the public's feedback and create a car based on this. However, when presented to the public, the car was a flop. What the public had said did not align with their actual desires.

Now, as a retailer, you understand that consumer demand is critical. Yet, often, you need some intelligence. The fact that customers frequently support strongly eco-friendly products does not mean they buy them.

Here is a study that shows what happened when consumers and senior retail executives were surveyed on sustainable products. Two-thirds of consumers said that they would pay more for sustainable products. However, most retailers stated consumers do not pay more for sustainable products. The retailers based their claim on what they said the public was doing. Read the report here.

So Are Customers Truly Ready to Pay More for Sustainable Products?

Let's explore what it means for your business.

The Conflicting Picture

• The Vocal Demand: Surveys consistently indicate that consumers care about sustainability. They say they are willing to pay more for products that align with their values.
• The Reality: Retailers see that old habits and price sensitivity often reign supreme in the market. Sustainable options get much interest but rarely make it to the sale.

Understanding the Disconnect

Here's what might contribute to this gap between what the public says and their actions:

• The Cost Barrier: Even well-intentioned consumers balk at significant premiums for eco-friendly alternatives.
• Trust: People have been burnt before eco-friendly and need convincing that your product is eco-friendly.
• Established brands: People like the products they buy now.
• Change: Sustainable products are often different, and people often do not want to change.

What This Dilemma Means for Retailers

• Missed Opportunities: If you rely solely on people's comments, you will probably overestimate the immediate market for sustainable goods.
• Long Game: Consumer behaviour rarely moves quickly. You must educate, show value, and build long-term relationships with eco-conscious shoppers. This is not always possible in a shop.

Tackling the Challenge

• Start with Data: Use your sales figures to understand which sustainable options resonate with customers. Don't guess! Please use your sales reports. Facts do not lie.
• Transparency Wins: Build trust by being transparent about specific sustainable aspects of your products. Be prepared to have info to back it up.

The takeaway: Customer opinions about sustainability matter, but they don't predict sales on their own

. Innovative retailers keep a pulse on the public conversation while making strategic, data-driven decisions on where and how to invest, e.g. small test displays of sustainable products first.