Retailers adjust as consumer incomes fall

For years, mega-retailer Wal-Mart (WMT) has defined its key demographic as customers who live from paycheck to paycheck. Lucky for them, this includes roughly half of all workers, with more joining the ranks every day.

The wisdom of the Wal-Mart strategy seems to be impressing itself upon other manufacturers and retailers: as economic times get harder and paychecks get smaller, numerous companies are tailoring their stock and marketing to consumers who are flush at the beginning of the month and tapped at the end.

For example, PepsiCo (PEP) has begun promoting large, comparatively expensive "multipacks" of snacks at the beginning of the paycheck cycle, switching to smaller individual servings at the end. By following this trend, companies and retailers not only maximize the effectiveness of their marketing, but also make better use of retail space.

From a consumer standpoint, this also makes sense: at the beginning of the month, bulk purchases salve the pain of late-month thrift, while helping customers to plan ahead for leaner times. Conversely, at the end of the month, a proliferation of small-ticket items tempt patrons with choices that are within their means.

The move toward consumer-oriented household thrift has also worked its way to the internet, where numerous "cyber mom" blogs offer tips on maximizing income, minimizing expenditures, clipping coupons, and reviving good, old-fashioned thrift. As the economy has taken a nosedive, these sites have exploded. For example, traffic to Southern Savers, a blog that offers free coupons, has grown by about 30% over the last month. In fact, Hitwise, a company that measures internet traffic, reports that visitors to four such blogs have increased by 250% over the past year.

While consumers rediscover the joys of thrift, retailers seem to be following in their footsteps. In fact, as media outlets track the savings of the newly frugal and retailers entreat mom blogs to feature their items, it seems almost as if the traditional top-down marketing model is being turned on its head. What remains to be seen if this trend marks a permanent change in the relationship between customers and retailers, or if it is merely a momentary respite between periods of Madison Avenue-driven consumption.
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