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Battered Market Report
June 6, 2008
I just returned from a three day/three market tour of some of the worst housing markets in the country. Phoenix, Las Vegas, and LA/Orange County have home values down about 24% vs. prior year. I was curious how restaurants were responding to this kind of economic stress on their customers and drove these markets, visiting many different concepts. There are definitely signs of life in most concepts, and as usual, Vegas benefits from having a tourist population that supplements their regular customer base.
The overall impression is that price is the hook that is being baited for the customer in all three markets, and in all segments of the industry. Many concepts are announcing how many items they have below a certain price point. 6 for under $1. 6 for under $6. 10 for under $10. QSR to upscale casual, everyone wants the customer to know that you can eat cheap if you want to.
It is difficult to gauge volumes on a quick drive through, but my perception is that in each of these markets many concepts are lighter in traffic than normal. There are fewer cars in the parking lots. Waits are short, or non-existent, during peak periods, however, there is still a lot of activity in most restaurants.
Now is the time to be hyper-aware of your concept’s price points relative to what is going on around you. Things are happening fast as everyone is trying to crack the code on how to keep cash crunched customers. Customers are like homing pigeons. If they find a new home, they may not fly back to revisit an old one. Do what you can to give them every reason to not go looking.
Posted by Lane Cardwell on June 6, 2008 | Comments (4)
Reader Comments
at 6/6/2008 2:59:21 PM, EyesWideOpen commented:
Now there's an eyes wide open, practical approach to the market. I guess we kept thinking the battering would end, but now we're starting to admit this could be more than a "hiccup". Great insights for hard times.
at 6/6/2008 8:15:58 PM, Jeffrey Summers commented:
Competing on price is only a tactic for those "commodity concepts" that cannot innovate enough to create a better value perception in the mind of their guests.
There are plenty of operators around the country who are enjoying increased sales and market share due to simply understanding that differentiating themselves and adding value are the ways to succeed in a sour economy ( and a not so sour one too!).
The economy is an excuse used by poor operators.
at 6/7/2008 5:33:31 PM, Dave commented:
You could have stayed home, wherever that is, to see price-based ads on restaurants. That is all that I see here in Atlanta when I drive around.
at 6/8/2008 10:07:10 PM, JB McD commented:
Jeffrey nailed it - "create better value perception". Cost may work for some to bring them in, but if you want them to come back - you have to sell the total package of your concept. Almost every concept is feeling the cost pinch in some way - so in reality, it is a level playing field (just wait until the next min wage increase however). Make them want to come back. Like several other posters have said - do what you can to control costs with out sacrificing the experience. When the dust settles, as it eventually will, the landscape will no doubt look a little different, but I have to think that those that really set the standard in service will come out OK