Consumers cutting back on credit card purchases

Retail Wire panelists commented on the rapid shift from credit to cash purchases. Several of my colleagues focused on bank card companies jacking up interest rates ahead of pending legislation…I focus on the effects of the recession and excesssive household debt:

This study is consistent with all the other evidence that consumers (like businesses) are digging their way out of excessive debt. And the vast majority of shoppers can no longer use their home equity as virtual “ATM machines” if they behaved that way in the first place. This is a trend that is not likely to reverse itself anytime soon, and it’s healthy over the long haul.

However, retailers need to respond in a couple of different ways:

1. Find ways to encourage shopping in your store (instead of the competitor’s) through old-fashioned focus on merchandise content, compelling value and effective branding.
2. At least use your proprietary credit card program (if you have one) to drive sales and loyalty programs, if consumers are reluctant to use their bank cards.
3. Make sure you are catering to “shoppers on a budget,” whether you offer opening-price goods or more aspirational merchandise.

The stores that have adapted fastest to the “new reality” of less credit and tighter household budgets appear to be the market-share winners today and in the near future.

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