This will be a first. Faced with economic contraction and consumer apprehension, how will companies increasingly focused on service, brand differentiation, environmental qualities and aspirational marketing react?

How will consumers react? Unlike the last two economic slowdowns, consumers are feeling the credit crunch in their pocket book. Will they change their spending habits? Will they lower their expectations from products, brands or companies?

Or would they expect companies to eat the economic difficulties (including the downstream costs resulting from soaring prices for staples like grains and oil) and spare them the pain while continuing to deliver the quality?

Starbucks has sent a signal: it is slowing the opening of new stores in the United States. Frankly, Starbucks has overpopulated so many neighbourhoods with outlets it could probably close hundreds of stores and maintain its volume.

(Well, maybe. My assumption only works if people are going to Starbucks for its aspirational qualities, not simply convenience. If they think McDonalds or a local coffee house has an equally good morning coffee, Starbucks sales could fall)

Last night, John Moore asked “if Walgreens went out of business tomorrow, would any of us care?”

No. Not really. Just like we didn’t care that Pier 1 and Bombay Co. stores closed. Did YOU notice that Restoration Hardware was in the toilet?
Difference is, I don’t look for aspirational values in my drugstore. I look for cheap children’s Tylenol and brand name toothpaste. And maybe a wide selection of Mother’s Day cards late at night.

Forward-thinking companies like Target have been trying to find a price-sensitive but fashion-forward niche in the general merchandise market. Kohl’s is trying the same trick by hiring Dana Buchman. Ralph Lauren is creating a line of goods for mass merchandisers, with a separate identity from his bread and butter lines.
If the credit crunch continues, and the US dollar continues to be battered in comparison to international currencies, consumers may face a difficult choice between affordable products and all the wonderful product qualities they have come to appreciate and flaunt: environmental sensitivity, design, flavour variation, international influences, and individual portion sizes.

In the end, which comes first: value-added attributes, the pocketbook, or government cheese?

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