Wallets Don’t Whinge!

I read the headlines that you read when it was announced that the Consumer Sentiment Index had hit an all time low. Petrol prices, terrorism and interest rates all to blame apparently. The sky is falling I think was the next headline as poorly performing retailers used it as an excuse for their lacklustre results.

But here’s something you may not have focussed on. Retail sales are continuing to grow. Consumers are not restricting their spending.

In fact if you do correlation analysis over the past five years between Australian Bureau of Statistics All Retail Sales growth and the Consumer Sentiment Index there is no correlation between consumers saying they feel optimistic or pessimistic and an increase or decrease in the ABS All Retail Sales number. Not even if you move the curves backward or forward do they match.

There may be a reassessment about where they spend their money or a different area may soak up more of it than another. But the expenditure of the consumer does not change with sentiment.

Consumers wallet don’t whinge and they don’t lie. Consumers can only rationalise 10% of why they buy. The other 90% is sub-conscious or unconscious and even the 10% is hard for them to articulate. The critical thing to watch in retail is behaviour. The one thing we do know is that needs shopping will always be number one.

After all, you have to have what you need to have to keep the household running. The discretionary purchases or wants purchases are the ones that go up and down according to circumstances, prices and mental, physical, emotional and social states.

If your business sits in the discretionary expenditure category, the only truth is that you must excite people to buy. In good times or bad – and retail is still in growth – give your customers something wonderful to buy or experience and sales will follow.