Cloudy futureCloudy future

Fern Glazer

Just when consumers were feeling a little sunnier about their financial future, the economic skies began to cloud up once more. 


Impacted by high gas and food prices as well as lackluster job growth, the American consumer has lost its sense of optimism again, which is dragging down restaurant visits and spending, say officials at global market research firm The NPD Group
.

According to Port Washington, N.Y.-based NPD, after eight quarters of decline, restaurant-industry traffic rose slightly at the end of 2010 and into early 2011, but declined again by nearly 0.5 percent in the quarter ended in May.


“The industry was starting to perk up, then spring hit,” said NPD analyst Bonnie Riggs. “Consumers aren’t thinking it’s going to get better anytime soon.”


While some consumers aren’t feeling the pain, the vast majority have been hurt in one way or another by the economic downturn, and they don’t expect things to let up anytime soon. According to a recent NPD report, “The Changing Consumer Mindset,” consumers are very worried about the years ahead, and more than three-quarters of adults have attitudes that result in cautious and controlled spending behaviors. 


Consumers are aware that the jobs recovery is going to be a slow process. Assuming job growth will continue at its current rate, it will take five years for full job recovery, Riggs noted.


When NPD asked consumers, “How long will it take for you/your family to recover from this recession?” 40 percent said it would take three to five years. Another 23 percent said it would take more than six years. 


“If you were to take that same poll today, it’s going to be even longer,” Riggs said. “There’s not going to be any let-up in cautious, controlled spending.”


Two types of spenders


When it comes to attitudes about social issues and concerns, NPD found that consumers fall into two camps: controlled spenders and optimists. 


Thirty-six percent of controlled spenders believe the economy will get worse before it gets better, compared with just 4 percent of optimists. Seventeen percent of controlled spenders feel we have high inflation, while just 7 percent of optimists felt the same. Sixty-two percent of optimists are upbeat about the future, and 30 percent of optimists believe that the president will turn things around. 


Thirty-three percent of controlled spenders are worried about having enough money when they retire, compared with just 9 percent of optimists. 


While they differ on the outlook for the future, when it comes to spending, both camps are concerned, NPD found. Sixty-two percent of controlled spenders and 21 percent of optimists said they are continuing to watch how they spend money on most or all of their purchases. In addition, optimists and controlled spenders are nearly equal in holding back when they visit restaurants. According to the report, 27 percent of controlled spenders and 21 percent of optimists said they are watching what they spend when they eat out.


With pressure on their spending ability mounting and prospects for job recovery remaining slim, consumers lately have been less inclined to either use deal offers or to recognize those deals as available to provide savings, NPD said. In the quarter ended in May, visits to a restaurant on a deal declined for the third quarter in a row, while non-deal visits picked up. 


“Consumers either stopped buying deals, or consumers saw deals as being standard, so they didn’t consider them a deal,” Riggs said. “Operators again are going to have to pull out all the stops. [They’re] going to have to do a lot to keep [consumers] coming in.”


Despite the downturn, several operators said their restaurants are experiencing positive traffic and/or sales and shared the tactics that are working for them.


“People are still coming in, but they are definitely aware. … There’s a lot of sharing-plate stuff going on,” said Jon Schlegel, owner of Denver-based Snooze, an A.M. Eatery. “They don’t have a lot of confidence that they’ll be able to come back in six months.”


Keeping prices steady


For Schlegel, keeping customers coming back is as much about what he isn’t doing as what he is. 


“The biggest thing we’re doing is not raising prices,” Schlegel said.


Despite rising coffee and food prices and proposed state legislation that would increase his health care costs for Denver-based stores, Schlegel has not passed on the increased costs to his customers. That said, Schlegel adds that price isn’t everything.


“It’s got to be more than the food. It has to be an experience,” Schlegel said.


The growing number of cost-conscious consumers actually has helped grow sales for Philly Pretzel Factory, which saw same-store sales grow 11 percent last year and nearly 8 percent so far this year.


“The recession has not impacted us,” said Marty Ferrill, vice president of operations. “We’re a value proposition every day.”


Ferrill said the company continues to find ways to push its value proposition. It has not raised prices, even though wheat prices have been particularly volatile. In addition, for the month of September, the pretzel chain has launched its Be the Hero campaign featuring 20 pretzels for just $5. 


Built-in value


At Trattoria No. 10, a fine-dining Italian restaurant in Chicago, diners are still coming in, but they’re spending conservatively and taking doggie bags.


“What I am seeing/hearing from people that visit our restaurant is that there’s not so much a sense
of despair so much as resignation,” owner Dan Rosenthal said. 


To keep the restaurant full, Rosenthal said he is mostly doing what he always does — offering great food and service at a value. But rather than discounting, Rosenthal said for the next 18 to 24 months he’s focusing on promotional events, such as a tomato festival, designed to boost interest and create a sense of value.


“Good restaurants have the value built in,” Rosenthal said.


Despite having a “good year” at his four Silicon Valley, Calif.-based Pacific Catch Fresh Fish Grills, restaurateur and food consultant Aaron Noveshen continues to find ways to better connect with his customers.


“It’s not so much about money,” Noveshen said. “It’s about reinforcing your brand attributes. How you differentiate at this time is really important.”


Among the recent changes at Pacific Catch are a re-engineering of the menu — including adding sustainably farmed shrimp, lowering the prices of popular entrées and adding more appetizer choices — as well as making tabletop tweaks like getting new dishware and removing condiments from the tables.


“You can’t sit back, good economy or bad,” Noveshen said. “If you’re not doing something, the guy next door is.”