Warren Shoulberg Column: The Wal-Get Ratio
July 29, 2010,
Ditch the Dow. Have no confidence in Consumer Confidence. And cop out when it comes to comp store sales.
If you want to know how's business, all you need to understand is the Wal-Get Ratio. It's so simple even somebody in the home furnishings business can figure it out.
We are in an era when store loyalty is pretty much zilch and shoppers can be found in every imaginable channel at just about any time buying just about any product. So the whole concept of looking at things in terms of upstairs and downstairs, mass merchants and better stores, chains and specialty stores is just plain crazy. Even if those demarcations truly once existed - and maybe they did and maybe they didn't - it's been a very long time since. What's more, even if the trade may have thought in those terms, the consumer most certainly didn't.
I digress, but I remember a retailer that billed itself as a "junior department store." Do you think there was a single customer out there who had even the remotest idea what a junior department store was? Hell, even those in the trade couldn't really figure it out.
So, forget all about these notions that the luxury trade is up, the luxury trade is down; discounters had a good month, discounters had a bath month; chains did well, chains didn't do well.
And start looking at it this way: People bought only what they needed to buy or people bought what they wanted to buy. They bought the basics and nothing else. Or they splurged and bought something they didn't really need or paid for something a little better than usual.
They went to Walmart more often. Or they went to Target more often. And that's it.
In the depths of the Great Recession, Walmart clearly outperformed Target because most shoppers were only buying what they needed. There were no discretionary purchases, it was all about the basics at very basic prices.
When you define your purchasing pattern that way, there is no better place on the planet to shop than Walmart. And anybody who tells you otherwise is just not right.
But as things eased up a little and people began to feel a bit better about their financial prospects, Target started to come back and Walmart began to fade a little. People were buying maybe a few things they didn't absolutely have to have or they were trading up for basics and selecting something a little special.
When you define your purchasing pattern that way, there is no better place on the planet to shop than Target. And anybody who tells you otherwise is just not right.
As we come into the crucial third quarter of this year, when it's not very clear which way the economic winds are going to blow, the Wal-Get Ratio will be the single best barometer in understanding consumer buying habits and the economy.
So, forget about Ben S. Bernanke, CNBC and everyone at the Harvard Business School: The Wal-Get Ratio will get it right way before any of them.
Other Articles By Author
Patti Carpenter Talks Color and its Importance in the Home
HFN's DIGITAL EDITION
COVER STORY: Sharpening the Focus on Millennials
Find out what makes Millennials tick when it comes to home decorating, shopping and at-home entertaining with HFN's annual consumer study. Turns out, Millennials favor the in-store shopping experience.
ALSO IN THIS ISSUE:
- Power of the People - Crowdfunding campaigns provide needed capital, feedback for home and housewares product launches.
- Omnichannel Retailing: Visual Search Takes Off - Learn how voice and visual search are revolutionizing product discovery.