Does Wal-Mart have a winner with Site-to-Store Shipping with FedEx? Do you expect many other retailers to quickly follow suit?

One of the purposes of on-site pick up is to get customers into the store, and then to get them to spend more. This sort of obviates that goal, doesn’t it?

Still, offering options and providing convenience are prime strategies, and FedEx locations have become ubiquitous, so I’m sure it’s a plus.

Filed Under Customer Service

When will consumers spend robustly?

Consumer spending is rising only modestly, if at all, and that only from severely depressed levels. What will it take to get the engine of private consumption and spending going again? Many say what is missing is job growth. But it is hard to see where large numbers of new jobs are supposed to come from. Others say consumer confidence is lacking. But only a minority of Americans express confidence in major institutions (Gallup), or believe that the federal government has the consent of the governed (Rasmussen). With such a large disconnect between elites and regular people, a big spike in confidence does not seem around the corner.

In my opinion what has really hammered consumer spending is the (reverse) wealth effect: the ratio of real wealth to debt has cratered. Until asset values return to previous levels (that may take awhile!), consumers will not spend robustly.

Research has confirmed that the impact of changes in wealth on spending is 7%, up or down: in other words, that every dollar gained in wealth increases spending by 7 cents, and every dollar in wealth lost decreases spending by 7 cents. Further, this rule-of-thumb seems to have applied across history to such an extent one may even consider it a constant. Thus, once our perception of wealth returns, so too will our propensity to shop, buy, borrow and spend.

When will we know this corner has been turned? By following the Consumer Demand Index every month:

Filed Under Consumer Behavior

Do you generally agree with Andrew Benett’s view of the evolving “mindful” consumer? If so, what do you think of Mr. Benett’s choices? If not, which public figures best represent today’s consumer mentality?

It’s ludicrous, all right. As I just wrote to a client who requested my analysis of the recent NY Times article, “Will It Make You Happy?” there is a difference between voluntary simplicity and involuntary penury!These examples are proof only that it can be expensive to live the simple life!Not all of the acquisition that goes on during the “good times” is wasteful spending; quite the contrary — for a lot of people that “stuff” is their first stuff, and their spending and consuming is sustaining a lot of production, trade, jobs, income, taxes, wealth accumulation, etc. General prosperity is a good thing, I believe!One of my presentation titles is “We Shopped Till We Dropped, Now We’ll Save to the Grave,” but I conclude with the point of the wealth effect: once consumers start feeling they are again getting wealthier rather than poorer, they spend. On the other hand, if this is the new normal, it seems a little bit poorer for all of us.

Filed Under Consumer Behavior

Are retailers achieving a significant boost from buy online, pick-up in stores options? How important is true cross-channel shopping for retailers? How can merchants best optimize cross-channel integration on websites?

I have to confess I am surprised the power and the potential of cross-channel has not been realized and implemented more quickly. But it will happen, and it will be big. As a noted futurist has said, we routinely overestimate short-term change and underestimate long-term change. But “never mistake a clear view for a short distance.”

Filed Under Ask Dr. Roger

How much of the overall retail business will online eventually become? Are there opportunities for more pure-play success stories to emerge? What will it take to make that happen?

Here’s the key quote: “The biggest mistake retailers make is that they see their online business as a separate business from their offline business. They don’t apply the same efforts or energy.As for predictions, here were mine from the same time period:Will online sales grow to the sky?  No, they’ll plateau eventually. E-commerce sales will continue to grow at a double-digit pace for the rest of the decade, reaching 4.3% of total sales by 2010 (Global Insight).  But the rate of year-over-year growth will likely decline from 24% last year (Jupiter Research), to 20% this year (Cowen & Co.), to below 10% by 2011.  The reason?  The industry is maturing; most of the people who are going to spend money online are already logged on and shopping.  There are no new fish coming into the pond (or, at least, rates of population and consumer growth are declining).But the influence of the Web on retail sales will continue to grow this year, next year, and every year beyond. That is because use of the Internet for pre-shopping, comparison shopping, browsing and choosing a store destination is growing more important, not less, even (or especially) if the purchase is not completed online.  Therefore, even though online sales will eventually plateau, retailers need to integrate their in-store and online environments to drive traffic, provide consistent service and customer experience, get a unified view of markets and merchandise, and to increase sales, profits, market share and stock price. 

Filed Under Ask Dr. Roger

Do you see evidence that consumers are getting tired of cutting back and are looking, in varying degrees, to open up the purse strings a little bit? Where do you see opportunities for retailers at this time?

If there is one iron-clad rule when it comes to the life cycle of recessions, it is that when things get cheap enough, buyers appear.

In other words, there is a bottom somewhere, if for no other reason than even after the worst disaster, survivors must move ahead with their lives. And we all have to buy the basic staples (even the bare necessities add up to billions of dollars in expenditures).

Will we completely change our lifestyles, living in smaller places, driving smaller cars, consuming less, become more frugal, less ostentatious, opting for voluntary simplicity, etc.? Fugetaboutit. I get asked about this during every downturn and I always say the same: only those who already have everything seem to buy into the notion of doing with less. And, as it turns out, they have to spend freely in order to impress themselves that they are living frugally.

What about consumers and consumer spending, such an important component of economic activity? Optimists point out that most people (upwards of 90%) are still working, earning, making their mortgage and credit card payments–and spending, if at a less frenetic pace. Pessimists see the credit contagion as spreading. They point to devastated domestic balance sheets, due to collapsing home values, declining net worth and reduced financial spending power.

I can here offer some personal and professional insight, from my long association with the Institute for Business Cycle Analysis: our own US Consumer Demand Index, the only monthly survey of American consumers which measures actual buying intentions (as opposed to sentiment, confidence or opinion, all of which are of course subjective). We query over 1,000 households a month on their specific spending plans across a broad range of durable and non-durable goods. We don’t ask their opinion of which direction the country is going, or on how good a job they think the President is doing. We ask them, are you, or are you not, in the next three months, going to be buying a car, PC or TV, white goods, home furnishings, kitchenware, toys, etc. In the case of food/groceries and clothing/shoes, we ask whether they are going to be purchasing more, less or the same amount as in the corresponding period of last year. Regarding those durable goods, we also ask, uniquely, if their household has no plans to be buying anything in those categories during the next three months. This gives us some unique insight into real consumer behavior.

Our March data show a fairly strong upturn (from a very depressed level of -37 to a less depressed level of -11). This is a significant improvement, but we will refrain from calling a bottom or turnaround until we see our three-month moving average in positive territory for three consecutive months. (On the basis of this March report, the three-month moving average improved only one point, from -26 to -25, so there is still a long way to go, but the positive direction and momentum is encouraging.)

[Feel free to contact me for a copy of the US CDI and subscription information (or feel free to Our monthly surveys, which have been conducted since February 2001, give a fairly accurate forecast of the strength and direction of the PCE (Personal Consumer Expenditures) and ISM (Institute for Supply Management) indexes 4 to 6 months ahead of official data.]

So where do I stand? I believe the tide is starting to turn–the rate of decline in most major economic indicators is clearly slowing. The forward looking stock market is well off its lows. In our latest CDI survey, the percentage of consumers declaring themselves on the sidelines decreased from the record high level of 68.4 in February to the still awful 62.2 in March (at least we’re moving in the right direction!).So is that flickering light we see the end of the tunnel or an oncoming train? Ask me in two months. I would offer a stronger opinion, but everyone in the “foreseeing” business ought to be properly humble from now on. Roger Selbert, Editor & Publisher,

Filed Under Consumer Behavior

What do you see as the biggest potential benefit to be gained from the use of handheld scanners in retail stores? How can these devices and supporting programs best be used to provide an improved customer experience?

I shop at Ralph’s here in LA, using a loyalty card, and they are obviously keeping track of all purchases. I just got a bunch of coupons in the mail for a list of items I purchase regularly. Recently, to promote a particular (remodeled) store, they sent three or four coupons (with specific use dates) for $10 off on a minimum $25 spent shopping (in that store only). You can bet I am a loyal customer.

The idea of having a hand-held scanner and getting coupons right in the store as I am buying sounds even more appealing. And as a retail analyst and consultant, of course I approve of the customization aspect. If loyalty and repeat (and increased) business is the goal (and it should be), then this seems a promising path.

Filed Under Connecting Technology

What do you think of CompUSA’s new retail 2.0 concept, especially its move to allow unrestricted internet access throughout the store? Even with its TigerDirect connection, do you think CompUSA will be able to compete on price against online competition?

Here’s the money quote: “Consumers are looking for alternative places to go and the thrill of walking into a store and looking at products is not easily replaceable for shoppers.”As I have been saying for 8 years, multi-channel, then merged-channel is how the best, most successful retailers operate today and will in the future.

Shopping from home before buying is now the rule, but consumers will gladly visit physical stores for the total experience. They will be able to access in-store Internet terminals for comparison shopping, but this is an advantage to the store in which they are standing. I see this as expanding visits, sales, profits, and growth (and raising the stock price).

Filed Under Business Strategies

Will the type of targeting that will apparently be offered by Cablevision result in significantly more advertising dollars flowing back to television? What will the potential of this type of targeting capability mean for consumer brand marketers and retailers?

I’m sure this will lead to positive results, but the real “holy grail” will be when consumers can seek out information on the products and services for which they are in the market at the present moment. Hey, I think we already have that: it’s called the internet! Just another argument for the integrated retailing imperative. 

The Sky Has Fallen: Now What?

Superstrategist Ed Yardeni is quoted by James Pethokoukis in US News & World Report on what could go right in 2009: (1) Lower mortgage rates fuel a refinancing boom which lifts consumer spending. (2) Home sales increase and home prices stabilize. (3) Easier credit conditions increase auto sales. (4) The drop in fuel prices also boosts consumer spending; the unemployment rate peaks below 8%. (5) Massive spending on infrastructure by the US government offsets weakness in such spending by state and local governments. (6) The money supply grows rapidly. (7) Stimulative monetary and fiscal policies overseas revive global economic activity and US exports. (8) Depleted inventories and improving sales trigger a big jump in industrial production. (9) Credit quality spreads narrow significantly and rapidly as investors seek better returns than available in Treasury securities. (10) Stock prices rise 30%-40% in anticipation of better earnings during the second half of 2009 and in 2010. (11) Inflation remains subdued, and productivity pops.My approach is “might as well be optimistic.” For more reasons the economic news (including consumer spending) is not all bleak, see the current issue of Growth Strategies (ask me to send it by email), or see my soon-to-be-posted piece

Filed Under Ask Dr. Roger