A note on consumer confidence and the retail market
There are many factors that go into the inner workings of our economy, none more important than Credit and Consumer Confidence.
Billions of federal bailout dollars are flooding the financial system, credit markets are loosening and many banks say they are ready to lend. However, a crucial piece of the recovery puzzle still needs to be solved: consumer confidence. According to the Nielsen Global Consumer Confidence Index, consumer confidence is at an all-time low. Bad news seems to be everywhere and it affects buying activities greatly. From a consumer standpoint, the world is now a very small place. When CNN or Fox News reports, millions of consumers are receiving the same information; newspapers have had to cut back staff and are relying on the national newswires for content. What used to be isolated “local news” stories is now big news everywhere. We truly live in a small world. Is this a good thing? Well, that all depends. When it comes to the economy and consumer confidence, I say no. Pack mentality rules the day. That may be standard on Wall Street but now it is infecting Main Street. If you have been listening to the news lately, you would think that on every street in America foreclosures are common place. But did you know that nearly half of the homes in foreclosure are concentrated in six states? California, Florida, Arizona and Nevada have been hit by a hangover after a home-building boom in the middle of the decade, which was fueled by rising home prices and investors snatching up real estate using risky mortgages. Those four states have nearly 400,000 homes in foreclosure, or a third of the nationwide total. Roughly 3.6% of all of the loans in these states are now in foreclosure. The other two states that are ground zero for the crisis – Michigan and Ohio – have been hit by the more traditional economic woes stemming from rising job losses, particularly in the automotive sector. What this amounts to is 2.5% of the loans on a national basis in foreclosure with 40% of those loans being the risky ARM loans. In today’s small world that means that consumers in a small town in Oklahoma are affected by homes being foreclosed in Las Vegas; not because their home is in jeopardy but because it shakes confidence. “Is that going to happen here? Maybe I should hold off on that new truck or wait on remodeling the kitchen.” What if the same information was framed a different way? Instead of “worst in history” or “thousands of homes in foreclosure,” what if it was reported that “97.5% of all mortgages were in good standing?” What we hear as consumers is: “foreclosure”… or ”worst in history.” Hearing that 97.5% of all mortgages are in good standing sounds a little different, doesn’t it? I am not trying to downplay the serious nature of our economic problems, and we all know that the news organizations will not change how they report, so what can be done about it? Communication! For retailers who are charged with selling a product and for us marketers who are charged with getting the word out, concentrating on the positives of the situation is the only way. If you are a car dealer, you are still in business to do business and you have vehicles to sell and service to perform. Telling consumers this is a great time to buy is one thing; showing them and asking them for business is another. You must get specific and approach your communications from a strategic standpoint. Recently we produced a series of ads for the Metro Area Dealers Association in Oklahoma. The message: we have money to lend, we have cars to sell, now is a great time to buy. Will it completely counteract the negative news? Who knows? What we do know is that the message that loan money and great deals are available is the truth, and more importantly it is something we can control. Sitting back and getting swept up in the river of negative messages will only drown your business. Stay positive. No one likes doing business with losers. If you don’t have a plan, we can help.
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